Puerto Rico tax shelter benefits are good enough to compare favorably with other small and equally vibrant havens around the world such as Ireland or Singapore. Some would even go so far as to call PR the Lichtenstein of the Americas. It gets even better for American citizens and corporate entities that are new PR residents or planning to relocate. Some of the highlights of the beneficial taxation regime are outlined below.
Federal and Commonwealth taxes are two separate issues. The former have to be filed only when there is earned income from non-PR sources. There is no federal income tax for earnings from within PR, and the commonwealth taxes that do apply are significantly lower or nil.
For example, all new residents whose relocation does not predate Jan 16, 2012 are 100% exempt from income tax on interest and dividends provided by local banks and companies. Even income generated from the PR branches of international corporations and banks are fully exempted. Also, no capital gains tax is applicable for new residents, which means that savings and investments grow faster without Uncle Sam taking a cut of the growth and earnings.
Property taxes are similarly 100 percent exempt for the first five years for new construction. There is a 50 percent exemption for existing properties. There will be no capital gains taxation even if the property value appreciates over time or rental income is generated.
Manufacturers and the service industry can avail of a low maximum income tax rate of seven percent. They can reduce this even more by making good use of exemptions and incentives offered to companies that create and support jobs and spend on capital investments. Many companies in special zones meant for economic development projects have effective tax rates of two to four percent.
For instance, any raw material purchases made from local vendors allow companies to claim tax credits. Research and development expenses, job creation, energy consumption, and so on are all valid for more tax credits. Capital spending on equipment and machinery provides accelerated depreciation. The financials and insurance sectors are even more deregulated, since international banking firms may apply to be fully exempted from licensing costs and having to pay taxes on income, dividends and property.
Investment fund managers and consultants whose main source of income is through carried interest will find PR to be a particularly appealing haven. Since it is a Commonwealth of the United States, they can relocate to Puerto Rico and maintain their U. S. Citizenship. They can continue providing services to investors on the mainland without having to pay capital gains tax on carried interest income.
People who wish to take advantage of Puerto Rico tax shelter benefits will have to actually relocate to the island, as opposed to simply registering a firm or getting an address by buying or renting a place. The law requires that new residents spend at least 183 days per year within PR in order to be eligible for the aforementioned exemptions. It's not that big a deal for anyone living or doing business on the east coast, since most U. S. Airports on the coast are just a couple of hours or so away from San Juan.
Federal and Commonwealth taxes are two separate issues. The former have to be filed only when there is earned income from non-PR sources. There is no federal income tax for earnings from within PR, and the commonwealth taxes that do apply are significantly lower or nil.
For example, all new residents whose relocation does not predate Jan 16, 2012 are 100% exempt from income tax on interest and dividends provided by local banks and companies. Even income generated from the PR branches of international corporations and banks are fully exempted. Also, no capital gains tax is applicable for new residents, which means that savings and investments grow faster without Uncle Sam taking a cut of the growth and earnings.
Property taxes are similarly 100 percent exempt for the first five years for new construction. There is a 50 percent exemption for existing properties. There will be no capital gains taxation even if the property value appreciates over time or rental income is generated.
Manufacturers and the service industry can avail of a low maximum income tax rate of seven percent. They can reduce this even more by making good use of exemptions and incentives offered to companies that create and support jobs and spend on capital investments. Many companies in special zones meant for economic development projects have effective tax rates of two to four percent.
For instance, any raw material purchases made from local vendors allow companies to claim tax credits. Research and development expenses, job creation, energy consumption, and so on are all valid for more tax credits. Capital spending on equipment and machinery provides accelerated depreciation. The financials and insurance sectors are even more deregulated, since international banking firms may apply to be fully exempted from licensing costs and having to pay taxes on income, dividends and property.
Investment fund managers and consultants whose main source of income is through carried interest will find PR to be a particularly appealing haven. Since it is a Commonwealth of the United States, they can relocate to Puerto Rico and maintain their U. S. Citizenship. They can continue providing services to investors on the mainland without having to pay capital gains tax on carried interest income.
People who wish to take advantage of Puerto Rico tax shelter benefits will have to actually relocate to the island, as opposed to simply registering a firm or getting an address by buying or renting a place. The law requires that new residents spend at least 183 days per year within PR in order to be eligible for the aforementioned exemptions. It's not that big a deal for anyone living or doing business on the east coast, since most U. S. Airports on the coast are just a couple of hours or so away from San Juan.
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