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Extra Realty, Inc.'s Puerto Rico Real Estate Blog (Bilingual)

Informing our present or future clients about the real estate industry in Puerto Rico. WE WANT TO HEAR FROM YOU!

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Informative and Objective. (Bilingual)
Why Puerto Rico?

Benefits and Protections for Investment

SELF-GOVERNING COMMONWEALTH IN ASSOCIATION WITH THE U.S.
  • No U.S. passport required for U.S. citizens
  • Applicability of the U.S. federal laws and presence of U.S. federal courts
  • U.S. currency, and banking regulated under the U.S. system (FDIC)
  • FINRA and SEC regulated financial service providers
  • Intellectual property protection under U.S. law
  • Participation in the trade agreements of the U.S.
  • Access to federal funds for infrastructure, social programs, education and research, among others

Favorable Tax and Cost Structure

A UNIQUE PROPOSAL FOR MULTINATIONAL CORPORATIONS

Foreign Tax Structure

  • There is no income tax at the federal level to residents of Puerto Rico
  • Tax treatment for Controlled Foreign Corporation (CFC), where federal income taxes for U.S. based multinational corporations are deferred until profits are repatriated to the U.S.
  • Favorable tax rates and incentives

Competitive Costs Compared to U.S.

  • The average cost of doing business in Puerto Rico is 10% lower than the U.S. average
  • San Juan offers the lowest costs of doing business of any major U.S. city

Favorable Business Environment

Business Friendly Environment

Puerto Rico has a strong, yet flexible legal and regulatory framework, with all corporate law and regulations published in English

English Language

Spanish & English are the official languages of Puerto Rico, and English is widely spoken throughout the island

Highly Qualified Professionals

Puerto Rico boasts high standards of education, and has highly qualified labor force in all fields, including law, finance, engineering, and health care

Act No. 22 of 2012 to Promote the Relocation of Individual Investors

Objective

To attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of Puerto Rico.

Goal

New local investments in real estate, services and other consumption products, and capital injections to the Puerto Rico banking sector, all of which will accelerate the economy of Puerto Rico.

Duration

The incentives will expire on December 31, 2035

Benefits and Protections for Investment

100% TAX EXEMPTION ON DIVIDENDS AND INTEREST
  • New Residents will enjoy a 100% tax exemption from Puerto Rico income taxes on all dividend and interest income.
  • Interest and dividends that qualify as Puerto Rico source income will not be subject to federal income taxation under Section 933 of the IRS Tax Code. New Resident investors may be able to reduce the tax rate applied on interest and dividend income coming from sources outside of Puerto Rico (including the source country taxation) to 0% or 10%, espectively, by investing through certain Puerto Rico investment vehicles.
100% TAX EXEMPTION ON LONG-TERM CAPITAL GAINS
  • New Capital Gains:  All capital gains accrued after becoming a New Resident will be 100% exempt from Puerto Rico taxes. These gains will not be subject to federal taxes.
  • Prior Unrealized Capital Gains:  All capital gains accrued and unrealized prior to becoming a New Resident will be subject to a tax of (i) 10%, if such gain is recognized within 10 years of new residence in P.R., and (ii) 5%, if such gain is recognized after said 10-year period.  Such taxes paid may be used as a credit in another jurisdiction that taxes such gains. The U.S. will not tax any prior unrealized gains if recognized after 10 years of residence in Puerto Rico.
  • To qualify for the Act 22 incentives, all gains must be recognized prior to January 1, 2036.

Providing Certainty for our New Residents

Tax Exemption Decree:

To enjoy the benefits granted under the Individual Investors Act, the new resident must apply for and obtain a tax exemption decree under the Act, which will be signed by the Secretary of the Department of Economic Development and Commerce of Puerto Rico.

Certainty until 2036:

The Tax Exemption Decree will constitute a contract with the Puerto Rico Government not subject to subsequent legislative changes. It guarantees the incentives until 2036.

Application:

Interested persons may obtain a Tax Incentive Application from the Office of Industrial Tax Exemption, which is available on their website http://www.ddec.pr.gov. Applicants who submit a complete application should expect to have their Decree in approximately 5 business days.

Published Wednesday, May 8, 2013 7:40 AM by Warren Rodriguez

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