In the current business scenario, Puerto Rico stands out as an attractive destination for investors seeking to take advantage of tax opportunities and enhance their financial growth. Chapter 2 of Act 60 (also known as Act 22) offers a series of tax benefits for individual investors who choose to establish their residence on the island. At Gierbolini Consulting Group (GCG), we are committed to providing expert advice to maximize tax benefits and guide investors on their path to financial success.
Eligibility for Tax Benefits:
To qualify for tax benefits under Chapter 2 of the Incentives Code, applicants must be bona fide residents of Puerto Rico for the entire taxable year. This chapter applies to individual investors who become residents of Puerto Rico on or before the taxable year ending December 31, 2035, provided they have not been residents of the island between January 17, 2006 and January 17, 2012.
Requirements to be a Bona Fide Resident of Puerto Rico:
Under Sections 933 and 937 of the U.S. Internal Revenue Code, a bona fide resident of Puerto Rico must meet three key tests:
- Presence Test: The individual must meet certain presence requirements in Puerto Rico during the calendar year, demonstrating a “significant connection” to the island.
- Proof of tax domicile: The location of the individual’s regular place of business, which is used for income tax deductions for travel expenses while outside of Puerto Rico, must be on the island.
- Proof of Closer Connection: The individual must demonstrate a closer connection to Puerto Rico than to the United States or any other foreign country, considering several factors.
Tax Benefits for Resident Investors:
Under Chapter 2 of Act 60, qualifying individual investors may enjoy the following tax benefits:
- 100% exemption from Puerto Rico income taxes on dividends from all sources.
- 100% exemption from Puerto Rico income taxes on interest from all sources.
- 100% exemption from Puerto Rico income taxes on all short-term and long-term capital gains accumulated after the individual becomes a bona fide resident of Puerto Rico.
Requirements and Commitments to Obtain the Residency Decree:
The process to obtain the residency decree under Chapter 2 of Act 60 involves the fulfillment of certain requirements and commitments, which include:
– Qualification as a “Resident Investor Individual” according to the definition established in the Law.
– Maintenance of bona fide residence in Puerto Rico.
– Making a minimum annual charitable donation of $5,000 to $10,000 to government approved organizations.
– Purchase of a real estate property in Puerto Rico for use as a principal residence.
– Filing an annual report to the Puerto Rico government.
Chapter 2 of Act 60 offers a valuable opportunity for investors who wish to establish their residence in Puerto Rico and benefit from an advantageous tax framework. At Gierbolini Consulting Group, we pride ourselves in being a strategic partner for investors seeking to maximize their tax benefits and mitigate negative tax impacts. Our tax and financial management advisory approach allows us to guide our clients towards financial success and sustainable business growth in the unique context of Puerto Rico. If you are looking for investment opportunities and a path to effective tax optimization, do not hesitate to contact us, we are here to boost your business and financial growth in Puerto Rico!