Why Puerto Rico Is A Tax Paradise For Americans | expatne.ws
23 June 2023
Puerto Rico is quickly becoming one of the most attractive tax havens for American citizens and businesses looking to lower their taxation rate and effectively shield themselves from the US federal government’s taxes. This is primarily due to two laws passed in 2012, known as Laws 20 and 22, which offer these individuals and companies a number of special incentives.
Law 20, also known as the Export Services Act, allows foreign investors to receive a 4% tax credit on any profits generated from services exported outside of Puerto Rico. This includes technology services such as software development, digital media distribution, web design, etc., as well as professional services such as marketing and legal consulting. In addition to this tax credit, Law 20 also allows businesses to operate without paying local or federal taxes in Puerto Rico.
Law 22, also known as the Individual Investors Act, gives investors who move their residence to Puerto Rico a tax exemption on all earnings generated outside of Puerto Rico for a period of 15 years. These individuals will not be subject to either US or Puerto Rican income taxes during this period. For those looking to invest in real estate or venture capital opportunities within Puerto Rico itself, Law 22 also offers an additional incentive–a 90% reduction in capital gains taxes on any investment-related profits made during their stay in Puerto Rico.
Combined together these two laws make investing in, and operating within Puerto Rico an incredibly attractive proposition for American citizens or businesses looking to significantly reduce their taxation rates. By doing so they can free up large sums of capital that would otherwise be drained by taxes imposed from the US federal government–allowing them more leeway with which to pursue potential investments or opportunities that can yield substantial returns for them over time.