Back in 2012, the Puerto Rican government signed a law that created a nice tax haven of U.S. citizens. Tax attorney Rob Wood comments on the Puerto Rican option, which was also the subject of his Forbes article “Hate Taxes? Move To Tax-Free Puerto Rico, Stay American, Avoid IRS.”
Wood opines that moving to Puerto Rico is a good choice for taxpayers who want to save money and who are willing to reside there. Among the qualifications are that the program is only available to new residents. Puerto Rico has become a legal tax haven because it is part of the U.S. “If you move to Puerto Rico, you do not give up your U.S. citizenship.” In spite of the continuing American citizenship, taxpayers who emigrate to Puerto Rico are not subject to the IRS tax structure.
Puerto Rico has a personal income tax rate of 4% for new residents. A taxpayer thus avoids not only federal taxes, but state income taxes, which in some states are considerable. In addition, Puerto Rico has no capital gains tax. John Paulson is touting Puerto Rico as “the Singapore of the Caribbean.”
Wood points out that he has not personally visited Puerto Rico, so he is commenting as a tax advisor rather than a partisan for moving. This might be a good option for some taxpayers, but perhaps not for all. Puerto Rico, perhaps recognizing this, requires that someone must reside in the country for at least 183 days each year in order to be counted a resident. Just owning a home in Puerto Rico will not be enough. Wood’s suggestion to anyone considering the move is to “get some advice and be realistic.”
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.