Move to Puerto Rico and pay no taxes?

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dsiomtw

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Mar 12, 2007
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End of the rainbow
With the recent Act 20 and Act 22, a US citizen can effectively pay ZERO taxes as long as you live in Puerto Rico at least 183 days out of the year.

All you have to do is setup a corp in PR, pay yourself a small salary (that won't generate any PR income taxes by the time you take deductions) and then pay the rest of your profits to yourself via dividends which are tax free.

For anyone with a high income and/or expecting an exit in the near future, even a temporary stay for a handful of years is quite attractive. I could certainly handle living there for half the year for the huge tax benefits.

I crunched some numbers and between the yearly tax savings and zero capital gains taxes when I sell my biz in the next 2-3 years, I could effectively almost DOUBLE the amount of money I'll make between now and then just by moving to PR for 2-3 years - and probably "retire" 5-10 years earlier than expected.

I wouldn't say it's anyone's dream location, but the nicer areas are not bad at all, and you're only a few hours flight to all sorts of awesome places (Miami, anywhere in the Caribbean, etc.)

Anyone looking at PR?? It's about the only option for a US citizen looking to reduce or eliminate taxes without giving up your citizenship. It's certainly "better" in almost all respects than moving to some 3rd world country, and moving there is no hassle just like moving to any other state ...
 
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I've looked at this pretty heavily myself. Made the move from California to Vegas already for taxes. PR would knock out a ton more though.

It really is the only option for many affiliates looking to cut taxes that are US citizens. Even moving to a 3rd world country doesn't cut your taxes unless you start doing some grey area stuff if you are a US citizen. PR however is a bad ass option.

A key thing to consider though is this could be changed almost instantly. So you could make some significant moves and have this tax benefit cut while your living there. To bad so sorry. However there are some BIG players that are making moves to take advantage of this. The plan is PR to become the new Singapore for financial trading firms that have US owners that want to avoid taxes. Some massive new extremely high end developments are under way in PR to support the 9-11 figure network guys that would be moving there.

Given the moves those big guys are making you can imagine they have a vested interest in making sure this tax loop hole isn't suddenly closed. But anything can happen in that regard.

I'm still considering if I'll be making the move for the later half of 2015 or not. Probably not going to happen for a number of reasons but I can push some income from 2015 into 2016 and make the move then if need be.
 
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miketpowell said:
A key thing to consider though is this could be changed almost instantly. So you could make some significant moves and have this tax benefit cut while your living there.
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Anything is possible, but as you probably know most people think this is very unlikely, at least not any time soon.

Zaino said:
Only 1 problem with that idea. The people who live there.
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Have you ever been there?

I could certainly handle it for a few years if it meant millions of extra dollars in my pocket.
 
I looked into it. If you don't spend time in the mainland US then you don't even have to spend the full 183 days a year there. You can get away with around 90. So you could spend 3 months a year there, and then be an expat the rest of the time.

Also noted that if you own an existing company you would need to "sell it" and pay taxes on it in order to move it to Puerto Rico. If you're just pushing rebills this shouldn't be a problem, but if you're established it might be.

Lastly, remember that you have to hire I think 2 or 3 Puerto Ricans to work for you.

Either way, it sounds like an awesome oppurtunity in a lot of cases. I've considered it for myself some.
 
i dont see a problem about living there.

rent a condo, move the business/start the new business there, hire some PR's guys at min wage to do some work and just vacation in Miami most of the week.
 
dsiomtw said:
With the recent Act 20 and Act 22
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And now, behold, I go bound in the spirit to Jerusalem, not knowing the things that shall befall me there.

Lol. Looks like a totally legit free lunch. Couldn't IMAGINE what the ulterior motive or loopholes might be here.

Good Luck Bros.
 
Looked into it briefly, but they are sticklers on the 183 days, and the fact that the local tech scene is very, lets say limited, and the fact they could revoke it at any time makes it less attractive than it might be otherwise.
 
eliquid said:
i dont see a problem about living there.

rent a condo, move the business/start the new business there, hire some PR's guys at min wage to do some work and just vacation in Miami most of the week.
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Residency is more granural than weekly.
 
Rincon. Filled with gringos to begin with, amazing surfing, great food, and will never change or get particularly expensive.
 
Well first things first: Don't take any legal or accounting advice on wickedfire from random people. Go see your own lawyer/accountant and get it straight from them.

The law in Puerto Rico isn't that you pay "no taxes", the law is you pay 4% on income and 0% on dividends/distributions. You'll still need to file taxes with the IRS as well as the Puerto Rican government and fork over 4%. Keep in mind that you can't just rent a cheap $5 per month mailbox and incorporate there you actually have to physically move and live there for at least 183 days. That means handing over your existing drivers license and getting a Puerto Rican one, update the post office and all of your bills with your new mailing address, send your kids to school there, etc.

The IRS requires that you have actual ties to the island and if you just show up at the airport, sign a 6 month lease, but keep your old drivers license and don't update your mailing/billing address and then bounce once 183 days have passed they'll have enough to say you don't really have ties there and just did it to lower your taxes.

Also even if you spend the 6 months in Puerto Rico but produce income while on vacation to the United States then that income would be subject to taxes. The same goes if you jet off to Thailand or whatever, you would be liable for any money you made while overseas if it goes above the foreign earned income exclusion. If you leave Puerto Rico you really don't want to do any type of work or earn any income otherwise you'll end up having to pay taxes on it.

Just some things to keep in mind, but again if you're actually thinking about doing this go see a lawyer or accountant who specializes in this type of stuff. When it comes to an online businesses it gets complicated because you may have built a site in the US a few years ago but now it's providing you with passive income or you setup a service with recurring revenue while in Puerto Rico but then move back to the United States. Now half of your members were "sourced" while in Puerto Rico and the other half "sourced" while you were in the United States, which is the right (and legal) way to account for them on your taxes?

You can read more about the "sourced income" requirements in this post I made back in December: http://www.wickedfire.com/2147880-post77.html

But again, see an actual attorney/accountant.
 
evolutionvision said:
Also noted that if you own an existing company you would need to "sell it" and pay taxes on it in order to move it to Puerto Rico.
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Don't think so. Lawyer I talked to in PR said you can just move your existing corp there, same way you can move your corp from one state to another.

evolutionvision said:
Lastly, remember that you have to hire I think 2 or 3 Puerto Ricans to work for you.
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That seems to be the unwritten "requirement" - 3 payrolled employees. In my case that would be me, my wife, and then I'd just hire a driver/cleaning lady/customer support person. Easy!

galacon said:
Lol. Looks like a totally legit free lunch. Couldn't IMAGINE what the ulterior motive or loopholes might be here.
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Basically the government there is fucked, like most. Problem is they can't print more money. They also have pretty high unemployment. So they are basically trying to do what Singapore did, and their "ulterior motive" is to attract productive people, investors and job creators to the island. Pretty simple to understand really.

mont7071 said:
Looked into it briefly, but they are sticklers on the 183 days, and the fact that the local tech scene is very, lets say limited, and the fact they could revoke it at any time makes it less attractive than it might be otherwise.
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Personally I'd just move there no problem. I could care less about the tech scene as my biz is already established. People much smarter than I have decided they are very unlikely to change things any time soon, so it's all good as far as I'm concerned. They NEED it to help improve their situation. They're not going to revoke shit.

If anything the feds are more likely to try to do something, but relatively speaking the IRS isn't going to lose much revenue, and if they fuck with PR's plans they will most likely end up having to bail them out so it's highly unlikely they'll do anything.
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Puerto Rico has had at a bare minimum 20 year "brain drain" w/ their best-and-brightest leaving for US schools. Have connections there & sure, it's an island paradise... w/ massive cockroach infestations, crime issues - (want to barb-wire your house?) , massive storms, and whatever you'd expect from a Caribbean Island. For most (and I mean most) guys here from the US, Just pay your taxes & save all the mental energy to killing your competitors.
 
Avalanche said:
Puerto Rico has had at a bare minimum 20 year "brain drain" w/ their best-and-brightest leaving for US schools. Have connections there & sure, it's an island paradise... w/ massive cockroach infestations, crime issues - (want to barb-wire your house?) , massive storms, and whatever you'd expect from a Caribbean Island. For most (and I mean most) guys here from the US, Just pay your taxes & save all the mental energy to killing your competitors.
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I didn't notice any massive cockroach infestions when I stayed there for 6 weeks and visited the entire island. Maybe you should stay in nicer accommodations??

Crime issues? That's like saying you wouldn't move to Michigan because of Detroit. If PR was a state it would statistically be the 19th safest out of 51 when it comes to violent crime.

Storms? They haven't had a "massive" storm in 20+ years. And they've made lots of changes and improvements and supposedly the people that know about that shit say they are much better prepared now.

I reckon it's easier to kill the competitors when you're only paying 4% or less in taxes dontcha think?

You got anything else?
 
Zaino said:
Only 1 problem with that idea. The people who live there.
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I think it was Socrates who was asked by the visitor about how Athens is.

Socrates said, "What's it like where you come from?"

"Oh," the visitor said, "the people are nasty and pushy and ugly and mean."

To which Socrates responded, "that's pretty much the way they are in Athens too."

Next day another visitor asks Socrates the same question.

He asks the same question in response.

"Oh," the visitor says, "where I can from the people are awesome and friendly and almost always happy."

"Yeah," Socrates said, "that's they way they are here too."

The story goes something like that ...
 
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