Besides its lush tropical forest, idyllic beaches, and rich cultural history, Puerto Rico affords residents many lucrative business and investor incentives. At Law Offices of Zorrilla & Silvestrini, our Puerto Rico business and tax lawyers assist individuals nationwide with protecting their assets, and maximizing their cash flow by relocating to Puerto Rico and utilizing all the benefits available to them including the powerful tax benefits of Act 20 and Act 22. Puerto Rico is unique from other states, such as Florida, in that it not only offers aggressive business and tax exemptions to incentive the islands growth, but because it is a U.S. territory, you can take advantage of them without leaving the United States, unlike Singapore and other international locations. Many people from many professions are choosing Puerto Rico as their residence to take advantage of these incentives, such as day traders, hedge fund managers, investment bankers, venture capitalist, and silicone valley executives to ecommerce business owners and manufacturers.
We understand how daunting it can be to relocate your business or family to Puerto Rico and complete the legal steps necessary to qualify for the Act 20 and Act 22 business and tax exemptions. That is why are team of U.S. and Puerto Rico Lawyers are available every step of the way.
People don’t often realize that the systems are so different. They don’t realize that a tax lawyer in Puerto Rico doesn’t usually deal with the IRS or federal tax regulations, but instead they deal with the Puerto Rican taxing authority called “Hacienda”. So you really need tax attorney’s that are familiar and can help you with both systems. Another difference is the estate planning or probate system. If you have done any level of asset protection or estate planning, there are a number of essential steps you have to take in order to continue being protected in your new residence in Puerto Rico. If you are ready to take a smart step towards preserving your wealth and securing your financial future, we can help. Just call (800) 541-4542.Incentives for Investors Under Act 22
In 2012, the Puerto Rican Government passed a series of legislations that provide lucrative tax exemptions and benefits to certain bona fide residents of the island. The Act to Promote the Relocation of Individual Investors, or Act 22, was part of this legislation. Act 22 is designed to encourage economic development by providing nonresident individuals with full tax exemptions on any interest, dividends, and long-term capital gains.
To take advantage of Act 22’s provisions, according to Puerto Rico law, a nonresident must establish residency in Puerto Rico by complying with the 183-day physical presence rule. This means that to qualify for residency in Puerto Rico, an individual must be physically present in the territory for at least 183 days of the year. If, however, the nonresident was a Puerto Rican resident at any time between January 16, 1997 and January 16, 2012, he or she will not be eligible under Act 22 to take advantage of the tax exemptions status.
According to federal statute 26 U.S.C. § 933, any income earned from sources located in Puerto Rico by established residents of the territory is exempt from federal income taxation. The tax exemption period commences on the date that the individual establishes residency in Puerto Rico, pursuant to the physical presence rule. Individuals wishing to take advantage of this statute must prove three elements. First, the individual must comply with the 183-day physical presence rule discussed above. Second, the individual may not maintain a tax home outside Puerto Rico during the tax year. Finally, the individual must demonstrate a closer connection to Puerto Rico than another United States location or foreign country. Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located. If you have more than one regular place of business, your tax home is your main place of business. If you have more than one place of business or work, consider the following when determining which one is your main place of business or work. The total time you ordinarily spend in each place. The level of your business activity in each place. Whether your income from each place is significant or insignificant. To determine residency under Act 22, they have to examine whether an individual has a close connection to Puerto Rico. This is evaluated according to a number of factors, often including the location of the individual’s family, personal belongings, home, and voting district.
After complying with Act 22’s requirements, qualifying individuals may enjoy a number of favorable tax exemptions. For example, any income from dividends or interest is fully exempted from federal income tax during the exemption period. If the revenue is derived from a Puerto Rico source, it may also be exempt from federal income taxes. Additionally, income from capital gains is exempt during the tax exemption period. Any prior capital gains accrued prior to establishing Puerto Rican residency are subject to a 10% ten percent tax rate if the capital gains are realized within 10 years of residency, or 5% five percent if they are realized after 10 years of residency. These rates are locked in until 2036 only if the investor qualifies and receives a decree from the government.Legal Guidance on Tax Matters for Clients Throughout the U.S.
The Law Offices of Zorrilla & Silvestrini team has provided knowledgeable advice on Puerto Rico’s Act 20 and Act 22 to clients throughout the United States. Many of the people we help come from states such as Florida, New York, Connecticut, Massachusetts, Illinois, Indiana, California, and Texas. Our experienced bilingual attorneys can help you make your transition to Puerto Rican residency smoothly and efficiently. Attorney Angel Silvestrini is licensed to practice law in Puerto Rico, Florida, New York, Connecticut, and Massachusetts. If you are interested in learning more about how Act 22 can help you make the most of the opportunities available to you please call us for a phone consultation at 1-800-541-4542 or contact us online.