A. We take all the special Puerto Rico tax benefits into account
Strong|Edge Realtor Organization deals with Puerto Rico’s Acts 22 and 20. These laws are designed to assist you to pay:
- Zero capital gains tax on any property sale after you make a move to the islands.
- Only 4% corporate tax rate on any Puerto Rico sourced business income earned from a qualifying entity.
The acts are a natural incentive to high net-worth families to invest in properties in Puerto Rico – as well as work and live “the life” in our luxury communities without renouncing US citizenship. The following itemizes some of the unique benefits to be derived:
B. Puerto Rico is a de facto tax haven
If you are searching for tax havens that work for the USA, look no further than Puerto Rico (PR). Just a few years back (2012) this island US territory passed two groundbreaking laws meant to transform it into a “global investment paradise.”
- First off, Act 20 permits corporations located in PR that export product and services (to wherever) to pay only 4% tax.
- Act 22 takes things a lot further: It officially establishes Puerto Rico as the only focal point for relaxation of personal income from capital gains, interest, and dividends anywhere in the whole of the USA. Effectively, the latter items attract zero taxation if you qualify.
Here is where it gets a little tricky. Any individual aiming at PR tax benefits has to prove to the IRS that he or she is a PR resident. This implies that the applicant has relinquished “close ties” with contacts on the mainland. Let’s get this clear: native Puerto Ricans do not get to enter the tax-benefit qualification booth under any circumstances. So if there is no close mainland contact/ and you stay at least 183 days a year on the island/ and you are not a native-born PR citizen, the ball is in play.
C. StrongEdge is at the cutting-edge of Puerto Rican Tax Laws
Strong|Edge Realty Organization is at the cutting-edge of everything to do with real estate investments and therefore by necessity is deeply immersed in these new tax laws. As a full-service real estate advisor to the wealthy and the middle-class considering PR relocation, we are expected to know what works and what doesn’t when it comes to Act 20 and Act 22 (i.e. but we are not lawyers so consultation of one is essential). As a precursor, we can offer this valuable direction on Act 22:
- If indeed you have spent less than 183 days here in Puerto Rico you can be sure the IRS will try recouping the taxes you underpaid.
- However, the lawyers will confirm there are ways to legally get around the letter of the law. For example, there’s the one-minute rule: if you are counted as being in PR for one minute, that minute counts as a day. So, theoretically, if you landed at the airport every day for 183 days, stayed 1 minute and flew out again, that counts as 183 days. We are not sure how that can be integrated practically, but it’s there for consideration.
- From another angle, after Maria, the IRS afforded all qualifying participants a 117-day award.
- It is important to realize that the cut-off points that distinguish qualifying PR investments are clear, and of course all past USA investments are excluded from this arena. Also, the new business must be for export – not for selling product domestically. To reiterate, the tax lawyer contracted will fill in all the quirky gaps you need to know about.
D. Key Considerations when dealing with Act 20 and Act 22
Aside from this, there are some basic important steps to follow that categorically cement the legitimacy of any candidate trying to benefit from these laws:
- Find a good tax lawyer before taking any substantial Act 22 steps.
- From there, establish a business entity in a recommended corporate structure (i.e. the lawyer will advise on this)
- Alongside this, find office space for your new business if possible and enter into a lease agreement. Basically, start paying rent. Even if it’s an online operation a small office rental is recommended.
- Choose a local CPA to manage the administration and books.
- Open a PR bank account, and start spending: buy a car, for example, with a local registration. Buy furniture for your new residence.
- Alternatively, officially import cars and furniture.
- Enroll your children in local schools.
- Switch insurance over to a local provider.
- While all this is going on, file your local application to conduct business through the new corporation in PR.
- Make sure your decree is approved, and then officially accept the decree.
E. Residential Real Estate when relocating for Act 20 and Act 22
Now, this is where partnering with Strong|Edge comes in big. Buy a residence on the island that meets your lifestyle. Update your address, change credit cards, UPS forwarding, etc., to align with this residence.
Before diving into a new residence purchase, consider the following:
- There are luxury homes, affordable homes, homes in vacation locations, and overlapping all of this, there are condos and single-family homes. In a nutshell, things are quite complicated (but exciting) here in Puerto Rico as a relocation destination.
- We believe it may suit you to rent for a few months before diving into long-term property commitments you can’t get out of. Realtor guidance is imperative to avoid falling into the many traps waiting to catch the naïve real estate buyer or renter.
- We should also point out that since hurricane Maria there’s a whole new opportunity out there, namely, short sales and forclosures.
- Finally, select an area: Dorado, San Juan, or perhaps There are many resort-like locales to choose from. Our menu above breaks down prime real estate listings by every conceivable filter, (including by area), depending on the lifestyle you are looking for.
F. Step Carefully around Act 20 and Act 22
Simply put, while you are trying to optimize your taxation story don’t waste your money on bad residential investments. If you do, the capital gains deductions won’t help in any way.
- You need Strong|Edge in your corner through all this. We know the best lawyers around to help your real estate negotiations and your taxes.
- We are reliable, honest, and patient. We’ll guide you through the process.
- On the residential side, we will find you the right property, at the right time, to meet all the right needs.
- If renovations are needed, we’ll direct you to the most effective contractors.
Make your new tax-saving journey stress-free by merging it with relocating in Puerto Rico in the best possible way. You should expect nothing less than a realtor that’s there for you 24 hours a day, 7 days a week; one that doesn’t judge you by the magnitude of your wealth. We at StrongEdge have the highest respect for all our relocating tax clients – big and small.
G. Keller Williams– Our sponsoring broker in Puerto Rico
Keller Williams is our sponsoring broker in Puerto Rico. They need no introduction: almost everyone knows KW as a leading real estate entity across many international borders. It has this to say about us:
“ Strong|Edge Realty Organization is a cohesive team intent on serving Puerto Rican visitors and residents with the KW platinum-standards. We stand behind them in every respect”.
Case Study: Our client, a wealthy entrepreneur living in NY, made up his mind to move permanently to Puerto Rico, and lucky for us he landed on our site in his Internet search. He was suitably impressed and contacted us. We mobilized all our resources that included tax and property attorneys to present a comprehensive overview before he even stepped on to the island. As a team, we held his hand all the way making sure he covered all the bases. When it came to our specialist area – residential real estate – we located excellent properties in the over $2 million range for him to look at. He invested soon after in his primary residence and then started investigating the foreclosure landscape with us. Considering he was compelled to stay in Puerto Rico for more than half the year, he wanted to be active. This was the right time and opportunity and the capital gains benefits are already working their magic.
Want to know more about tax viable real estate buying, selling, and renting opportunities in PR? Interested in business tax incentives for relocating US citizens? Contact Strong|Edge Realty Organization today. We are the Puerto Rico residential agents to set you on track to seize these open new opportunities. To learn more, call us today at (971)285-0847 or email us at firstname.lastname@example.org and let us start working for you. Strong|Edge is the one you can depend on and trust.