Sunday, March 17, 2013

Puerto Rico Tax Law Makes News

A new tax law in Puerto Rico that allows new residents to pay no local or federal taxes on capital gains, is getting a lot of attention.  The new tax law in Puerto Rico, passed by the previous administration of former Gov. Luis Fortuño, is attracting wealthy individuals, such as hedge-fund managers, to relocate to Puerto Rico.  It was reported that at least 10 wealthy individuals have already made Puerto Rico their home, to take advantage of the tax breaks, and 40 more are in discussion with the government.  Pricey real estate properties have been purchased in the desired locations of Condado and Isla Verde in the San Juan area.

Under the new tax law, any capital gains accrued after a person moves to Puerto Rico would be tax free.  Dividend and interest income paid by U.S. companies would still be subject to U.S. federal taxes, though would not be taxed locally.  With this tax law, the Puerto Rican government aims to promote investments in real estate, boost services and consumption, and encourage foreign service providers to move their businesses to the island.

In order to become eligible for the new tax breaks, a person must live in Puerto Rico for at least 183 days a year and prove that they have social and family connections in Puerto Rico.  Any person who moves to the island signs a contract with the government that guarantees the tax break through Dec. 31, 2035.


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