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Puerto Rico has seen an influx of Americans who have decamped to its balmy shores with their crypto fortunes. Why?
Favorable Tax Laws
Those with a crypto-will-travel mindset have found Puerto Rico’s extremely favorable tax laws, beautiful beaches, and warm weather irresistible.
Under Act 60 Puerto Rico residents pay a mere 4% on capital gains, dividends, interests, and royalties. That low tax rate also applies to corporations.
Puerto Rican companies that export services performed in the territory to people or companies outside of the territory. This is ideal for online entrepreneurs and service providers who have U.S. businesses, employees, and clients. To receive this rate, an entrepreneur needs to open a Puerto Rican company, establish their business on the island and begin exporting services from Puerto Rico to the U.S. The U.S. does not apply exit taxes to mainland U.S.-based businesses that move to Puerto Rico. Forbes.com
Entrepreneurial types can move to Puerto Rico, set up a company and after they become a bona fide citizen, capitalize on the tax benefits offered under Act 60 by paying themselves a salary.
Even though Puerto Rico is an American territory any income earned there does not have to be reported to the IRS either, and is only subject to the aforementioned favorable tax laws of the island.
To take advantage of Puerto Rico’s favorable tax laws for entrepreneurs, especially of the bitcoin variety, there are a few requirements.
First, you have to become an actual Puerto Rican citizen by December 31, 2035. You cannot have been a citizen for the past 15 years, so this generous tax incentive is aimed directly at bringing foreigners in. Yes, this does suck for people who are already citizens (more on that later).
To become a citizen there is a lot of paperwork, of course. Instead of trying to slog your way through it alone, make it easier by hiring help like internations.org for the citizenship part and a good local lawyer to set up your business and register it with the tax authority.
You have to reside there for 183 days a year, so finding a place to live is the next step. Puerto Rico’s north shore has become a crypto entrepreneurs hub making it a good place to start your search.
For Americans, since Puerto Rico is a U.S. territory, you don’t need a visa or even a passport to travel to the island. So many Americans have made the move that many hotels and restaurants host crypto events for those livin’ the life.
What is the Puerto Rican lifestyle? Well, for one, it is known for festivals and celebrations. There is some kind of event pretty much every month, every weekend, in fact. Most involve lots of music, dancing, parades, amusement park rides, and fried foods.
Colorful street murals and art galleries abound. There is no shortage of local artists and art with plenty of modern or classic pieces to choose from.
For the nature lover, there is endless opportunity to explore the many beaches, mountains, waterfalls, and the El Yunque tropical rainforest.
Puerto Rico pours a sizable amount of its budget into education. They are also very proud of their 93% literacy rate. Schools follow an American-like model and attendance is compulsory from ages five to 18. Public schools are taught in Spanish but the many private schools offer instruction in English and Spanish.
There are also quite a few post-secondary colleges and universities to attend. Some are state-controlled while others are private. The University of Puerto Rico, which was established in 1906 in Rio Pedros, San Juan, is the oldest public institution.
Puerto Rico’s healthcare system is run by the government but it is not free. Despite citizens paying into the system, it is chronically underfunded. Many doctors leave for better pay in the United States. It is recommended that if you can afford it, buy private health insurance. Keep in mind, if you have an emergency and call 9-1-1 the operator will most likely only speak Spanish, though you can ask to be transferred to one that speaks English.
In 2019 the American Society of Civil Engineers gave the infrastructure of Puerto Rico a D-, a near failing grade. Most of the island’s 282 bridges and approximately 1,400 miles of highway are in poor condition. Decades of neglect, shoddy construction, and regular bashing by hurricanes have left the infrastructure in a crumbling state of disrepair. If the Biden administration’s Build Back Better legislation ever gets through Congress, there are a few billion dollars earmarked to fix up Puerto Rico’s potholes and shaky bridges, though.
As you may remember from the massive 2017 hurricane that hit the island and left devastation in its wake, the power grid is unreliable. You will need a backup plan (generator and gasoline) when (not if) another hurricane wipes it out.
Before you sell your house in the states, pack up the family and transfer your bitcoins to Puerto Rico keep these things in mind.
Most people in Puerto Rico speak Spanish and very little English. Around the touristy areas, you will find lots of English speakers but when you are trying to connect your utilities, get a cellphone or buy a car, you will need to know a little Spanish or have a good interpreter with you.
If you want your kids to be taught in English you will have to spring for a private school. Tuition varies depending on the location and size of the school. If they attend public school they will need to be fluent in Spanish. Homeschooling is a popular option for many ex-pats.
Puerto Rico is a poor nation with a high crime rate even in the wealthiest areas. You will need to stay aware of this at all times.
Also, hurricanes. Big ones.
Not everyone, specifically the locals, will be thrilled to see you moving in.
The fact that foreigners, yes that includes Americans, have access to generous tax breaks as individuals and entrepreneurs means you might encounter a bit of resentment from the locals who are exempt from Act 60.
Foreigners, yes, including Americans, buying up houses have pushed real estate prices high and reduced inventory making the already tight housing market tighter and leaving many local Puerto Ricans with few options when it comes to buying or renting a home.
There are, of course, other tax friendly, crypto welcoming-with open-arms countries to consider, but unlike Puerto Rico, you will have to get a visa and citizenship will be much more difficult to damn near impossible to obtain. Some other countries friendly to crypto holders are:
Germany - Yeah, I’m surprised too. Bitcoin transactions are exempted from VAT (value-added tax). Cryptocurrencies are not considered a currency but if held for more than a year capital gains are not taxed like other income because it is not considered actual money.
Singapore - Businesses in Singapore that buy and sell virtual currencies in the course of doing business are taxed on the profits like income. But (big but) if an individual or business holds cryptocurrencies as a long-term investment there is no capital gains tax in Singapore itself.
Portugal - Businesses have to pay capital gains tax on cryptocurrency profits but individuals holding bitcoins are exempt from VAT and personal income taxes.
Switzerland - A nation already known for being a good place to stash a lot of cash, individuals who invest and trade cryptocurrencies get a tax-exemption on capital gains. Businesses that trade cryptocurrencies are taxed as is any salary you receive in bitcoin from a business, though.
If cryptocurrencies have been favorable for you and the thought of paying a lot of taxes on your good fortune does not sound, well, good, then maybe Puerto Rico is for you.
Before you go, though, do your research. While Puerto Rico is an American territory it is not the United States; not in regards to education, housing, infrastructure, and culture. Make sure you are prepared for the change in lifestyle and respectful of the citizens, most of whom are friendly and welcoming, by learning some of their language and customs.