(Tittle Press) - President Joe Biden said the economic fallout from the Reagan era of the 1980s was not working because he wanted to reverse tax cuts for the rich. The looming crackdown has scared the wealthiest investors, including crypto investors, who descend on Puerto Rico to dodge tax hikes.
Puerto Rico passed two major tax bills in 2012 that turned the island into a cryptocurrency tax haven. Under Law 22 of its local tax code, the Caribbean Island and the Unincorporated U.S. Territory provide full exemption from all local passive income taxes to new residents. Law 20 provides for a corporate tax rate of 4% and exemptions on dividends. This is a much better deal than in the United States, where investors pay 20% in long-term capital games and 37% in short-term wins.
The explosion of remote working, expanding crypto markets and tax havens have made the Caribbean island attractive to crypto investors.
This was the case with Anthony Emtman, who left Los Angeles and bought a condo in the complex in March. The CEO of Ikigai Asset Management is now part of a thriving crypto community along the north coast of Puerto Rico, where the tropical climate is just a bonus.
Emtman and his crypto peers are taking a page from the hedge fund books and looking to reside on the island for huge tax savings. -Bloomberg
The rise of crypto markets has made it an easy target for the Biden administration and Democrats to tax the industry hell. Smart money understands what’s coming and doesn’t want it.
Crypto funds Pantera Capital and Redwood City Ventures have moved to the tropical island to evade US taxes. Facebook product manager-turned-whistleblower Frances Haugen recently revealed that she moved to Puerto Rico to be with her crypto friends.
Now, “it’s not just about ‘Move to Puerto Rico to save tax,'” said Giovanni Mendez, corporate tax lawyer. “It’s ‘Move to Puerto Rico because everyone’s there.'”
Puerto Rico’s tax laws were put in place to help its struggling economy a decade ago. Hedge funds have been shifting their operations from the northeastern United States to the island for at least half a decade or more.
So far this year, Puerto Rico has received more than 1,200 applications – a record – through its Individual Investor Act, which exempts new residents from paying capital gains taxes, according to the Department of Economic Development and Trade of the island. The number of mainland Americans seeking tax breaks in Puerto Rico has tripled this year.
Another 274 corporations, limited liability companies, partnerships and other entities have been approved for the Export Services Act, which provides for a corporate tax rate of 4% and a 100% exemption on dividends. Both fall under Puerto Rico’s Law 60, a group of tax breaks that were consolidated in 2019 to attract investment not only from crypto, but also from finance, tech, and other industries. -Bloomberg
Michael Terpin, the founder of BitAngels, moved to the island from Las Vegas in 2016. He is known as the “messiah” for convincing people to move to the island.
Crypto investors are interested in several areas of the island: Bahia, which is 42 km east of San Juan, and the Ritz-Carlton Dorado Beach complex.
The wave of new arrivals has lifted the real estate markets in the country. Francisco Diaz Fournier, founding partner of Luxury Collection Real Estate, said some properties are now selling for over $ 20 million.
“Right now we’re selling a house in Dorado Beach for $ 27 million, and another for $ 29 million,” Fournier said.
Blanca Lopez, founder of Gramercy Real Estate Group, said Bahia’s prices per square foot have doubled.
“We are seeing prices north of $ 3,000 per square foot,” Lopez said. She said homes in Condado cost between $ 1,400 and $ 1,500 per square foot, an increase of about 35% from a year ago.
Meanwhile, stocks are dwindling for high-end homes.
“We don’t have a place, at least not in Dorado, Bahia or Condado,” Fournier said. “The market is expanding, so we’re seeing spillovers in areas of San Juan where people wouldn’t be watching before.”
So far, tax incentives seem to be working. Crypto investors are flocking to the island to dodge Biden’s proposed tax hikes. However, the IRS has a message for high net worth individuals, businesses and cryptocurrency traders relocating to the island: “We are waiting for you …”
The bad news is that pressure for a state would kill its tax system. In the meantime, wealthy crypto investors don’t care and seek tax shelter on the tropical island.
BY NEWSDESK
DECEMBER 17, 2021
