Act 20 & Act 22
Puerto Rico, up to now, has been known for its beautiful sandy beaches, warm weather, warm and friendly people, and a vacation destination where your U.S. Passport is not required. But now, it is getting more attention for another reason; some call it a Tax Haven, gaining the moniker “the Singapore of the Caribbean”, coined by the billionaire financier John Paulson, but to be sure, for those who qualify Puerto Rico is an opportunity too good to pass up. The reason is stated by the New York Times, September 5th, 2014 article:
“Puerto Rico, a commonwealth of the United States, passed legislation in 2012 that shields new residents from paying most federal income taxes. After a slow start, Puerto Rico’s status as a tax haven is beginning to catch on, and some are betting big bucks that the trickle of buyers moving there will soon become a stream. Local officials hope that new investment will help turn around an economy battered by several years of recession.”
The legislation that the New York Times makes reference to is a combination of two legislations commonly known as Law 20, “Private Equity Funds Act”, and Law 22 , “Act to Promote Export Services” (also known as, Act 20 and Act 22).
Forbes Magazine also has covered the attractive tax incentive programs in several articles and opinion pieces. In their article titled, “Puerto Rico Expands Tax Haven Deal For Americans To Its Own Emigrants” you see how much these tax incentives are growing and how much backing they are receiving and how unlikely it is that they are repealed. It is no wonder why people are jumping at this opportunity before the statutory window closes.
See article below:
Examples of types of business that qualify under the Puerto Rico Tax Incentive Programs are:
- companies that export goods and services,*
- Energy trading companies
- computer or software programming,
- call centers,
- management services,
- “Corporate headquarters” for a business,
- Hedge funds, venture capital firms
- Management companies
- Financial services
- Internet sales,
- Telecommunication and IT companies,
- CPA Certified Public Accountants
- Web and Print Design Services,
- Lawyers or Law firms
- Manufacturing of export products.
To qualify as an export service, the service or product provided must be directed at a foreign entity or non-resident person or customer that does not have a connection or nexus with Puerto Rico. Puerto Rico. Even if a company is not 100% service based there are ways to benefit substantial from these Puerto Rico Tax Incentives.
For the people that run or own these types of businesses Act 22 can be an essential part of their overall tax planning strategies. Passive income (interest and dividend) that flows through the Act 20 company to the investor, can be taxed at a 0% tax rate.
Additional to the benefits associated with Act 20 entities, the Act 22 investor will take advantage of 0% on capital gains. For day traders, hedge fund managers or others associated with Wall Street and the stock market, Act 22 can be a power tool to substantially minimize the person’s tax burden.How to move or relocate to Puerto Rico to take advantage of theses tax and business incentives?
The Law Offices of Zorrilla & Silvestrini is a full service law firm that focuses on interstate legal issues such Act 20 & Act 22. Our firm can advise you on what to expect when relocating to Puerto Rico and what type of incentives are available to you or your business. There are many programs available and you must know how to take advantage of them, from property tax, municipal tax as well as income tax. We will help guide you through the application and qualification stages, as well as with all the logistics associated with relocating personally and/or with your business to the island of Puerto Rico. We will provide you from with the information you need, like entity formation, corporate governance, registration and licensing as well as asset protection and estate planning for owners and wealthy individuals. Puerto Rico offers an unlimited homestead exemption from creditors, which should figure into your Asset Protection plan.
You should keep in mind that Puerto Rico has a different Probate system than most states, like Connecticut, Florida Massachusetts and New York. The main difference is that Puerto Rico has a forced heir system that needs to be taken into account in your overall planning. Our Puerto Rico Lawyers will help you through all of this.
Some of the benefits afforded under Act 20 and Act 22 are a 4% maximum corporate tax for Puerto Rico companies that qualify under the Act, which has the added benefit of 0% Federal tax burden on income derived from Puerto Rico sources, and the same 0% for the new qualified services under the Act. Also, new residents enjoy an unprecedented 0% tax on capital gains, dividends and interest earned on investments. Most importantly to investors and businesses, under Act 20 and Act 22, the government guarantees all these incentives until the year 2036.
Doing business and living in Puerto Rico has many advantages. For the individual, world class dining, beach front living, US currency, no Passports needed and all the major US retail and luxury chains are situated in Puerto Rico. From Macy’s, Costco and Walmart to Cartier, Salvatore Ferragamo and Gucci, shoppers will feel right at home in Puerto Rico. Boating and sailing enthusiasts will certainly take advantage of all the Yachting and Marina Centers on the island and the 80ºF weather year round adds to a wonderful place to live.
Along with the Puerto Rico business tax credits and incentives, there is the added benefit of having US Currency, no passport requirements, one of the most skilled labor forces in the world, and low wages, which certainly represent alluring and attractive factors to consider in relocating your business to Puerto Rico.
All in all, Act 22 offers unprecedented benefits to wealthy U.S. Citizens, Legal Permanent Residents and those who have work visas that want to take advantage of the incredible benefits of relocating to Puerto Rico, such as 0% on capital gains and other passive income. To take advantage of a fixed maximum corporate tax rate of 4%, Act 20 offers huge benefits even if the shareholders or principals move to Puerto Rico. We can help you and your business lock in these incredible tax benefits for 20 years. To find out more about these benefits and to speak to our Puerto Rico Licensed Lawyers, contact us today.
Law Offices of Zorrilla and Silvestrini, PA: (800) 541-4542.