Puerto Rico as a Domestic Tax Haven: Relocating as an Alternative to Expatriation to Claim Income Tax Savings

Puerto Rico Act 20 Export Services and Act 22 Individual Investors, Residency Requirements

A live 110-minute CPE webinar with interactive Q&A


Wednesday, August 28, 2019 (in 5 days)

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

(Alert: Event date has changed from 8/1/2019!)

or call 1-800-926-7926

This webinar will provide tax advisers to high net worth individuals with a practical guide to the planning opportunities and challenges of relocating to Puerto Rico as an alternative to tax expatriation. The panel will discuss income tax incentives specific to Puerto Rico, such as the Investor Act and the favorable treatment of capital gains and dividend income. The webinar will also detail residency requirements and outline potential caveats to U.S. taxpayers considering relocation to Puerto Rico for tax purposes.

Description

With the enhanced focus on offshore tax avoidance, it is ironic that one of the world's last remaining tax havens is a U.S. possession, namely the Commonwealth of Puerto Rico. Both the Internal Revenue Code and Puerto Rican tax laws provide significant tax minimization opportunities for high net worth individuals and business owners to relocate to the island.

IRC Section 933 exempts bona fide residents of Puerto Rico from U.S. federal income tax on any Puerto Rico-sourced income. As a further sweetener, Section 937 sets the threshold for establishing bona fide residency in Puerto Rico (and some other U.S. possessions) at 183 days, which are more favorable terms than residency rules for offshore non-U.S. jurisdictions.

In addition to the IRC provisions, Puerto Rico has enacted several tax provisions designed to attract investors and business owners to relocate to the island. The two key provisions are Act 20 (Export Services Act) and Act 22 (Individual Investors Act). Act 20 sets a maximum income tax rate of 4% on the net profits of any business exporting services from Puerto Rico to companies or individuals outside the island. Act 22 exempts from income tax all passive income derived by bona fide residents of Puerto Rico and follows IRC 933 in setting the threshold for residency at 183 days.

These provisions, when taken in combination, create a tax haven virtually unmatched by any foreign jurisdiction for tax savings. Tax advisers must recognize the requirements and potential drawbacks of relocating to Puerto Rico in determining whether their client's circumstances would benefit from this unique tax haven.

Listen as our expert panel provides a practical guide to the tax haven opportunities and challenges of relocating to Puerto Rico.

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Outline

  1. Internal Revenue Code provisions specific to Puerto Rico and certain U.S. territories and possessions
    1. Section 933
    2. Section 937 special residency rules
    3. IRS notice requirements
  2. Puerto Rico tax incentives
    1. Export Services Act 20
    2. Investor Act 22
    3. Tax Exemption Decrees For Act 20 and Act 22
  3. Other Puerto Rico tax incentive provisions
  4. Establishing residence
  5. Caveats

Benefits

The panel will discuss these and other relevant topics:

  • How Internal Revenue Code provisions and Puerto Rico local tax statutes provide an alternative tax haven to expatriation for certain high net worth taxpayers
  • Specifics of Puerto Rico's Act 20 (The Export Services Act) and Act 22 (The Individual Investors Act) as vehicles for attracting U.S. mainland-based taxpayers to relocate to Puerto Rico
  • Timing, notice and qualification requirements to claim tax benefits of Act 22

Faculty

Akhavan, K. Eli
K. Eli Akhavan

Chair, Private Clients and Wealth Preservation Group
CKR Law

Mr. Akhavan focuses his practice on domestic and international estate, asset protection and tax planning for high...  |  Read More

Hernández, Gabriel
Gabriel Hernández, CPA

Partner
BDO

Mr. Hernández is an expert in providing tax consulting services to clients in the U.S. and Puerto Rico,...  |  Read More

Rubinger, Jeffrey
Jeffrey L. Rubinger

Partner
Bilzin Sumberg Baena Price & Axelrod

Mr. Rubinger practices in the area of domestic and international taxation. He has been involved in tax planning...  |  Read More

Wood, Robert
Robert W. Wood

Managing Partner
Wood LLP

Mr. Wood has broad experience in corporate, partnership and individual tax matters. Concerning the tax treatment of...  |  Read More

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