Although Puerto Rico is technically part of the United States, it feels like a different country. Many people are flocking to this tiny Caribbean island and not just for the white sandy beaches, warm weather and cool blue water.
Tax Act 60 is a hot topic. It was created to give Puerto Rico a big economy boost by inviting investors and high net worth individuals. Its goal: to make Puerto Rico their new home and business hub. From 2021 to 2022 alone, more than 27,000 people moved to Puerto Rico from the US. That number is continuing to rise. One cannot deny the tax benefits:
Once approved for residency, one can apply for a 15 year residency under Tax Act 60, where new residents can take advantage of:
- 4% flat tax on income
- 75% reduction in property taxes
- No Capital Gains tax accrued after residency
- Businesses can see a 50% reduction in municipal license taxes
All this is possible because the island is in a different tax jurisdiction for IRS purposes.
There is A LOT of fine print. Some hefty initial fees and a 6 month minimum annual commitment every year for at least 3 years. And don’t even think about trying to fly under the radar and “pretend” to live there just by buying a home. The IRS has vigorously pursued those who try to take advantage of the system. If you are going to do it, you need to be All In, as they say.
Not an Easy Adjustment
Ricky Santana, founder of Colectivo, a Real Estate firm assisting those moving to PR from the US, recently told Business Insider, “This is not for everyone. Moving to a small island is great for many reasons but there are tradeoffs.” Santana went on to list a few of the adjustments many transplanters are finding difficult:
- Schools: The better schools are in San Juan, which is about a 40 minute commute from the more desirable areas to live. Schools are also struggling to keep up with the booming population growth.
- Healthcare: Puerto Rico experienced a healthcare crisis in 2015, followed by Hurricane Maria. 15% of the island’s healthcare providers left the island for good. Specialists are hard to come by; many find themselves flying to New York or Miami to maintain relationships with US based providers
- There are lots of things that take some getting used to, for example, routine Amazon deliveries can take up to a month. Furniture is in scarce supply, again, due to the large influx of new residents.
If moving to Puerto Rico sounds appealing, consider taking a month long vacation there first. Get used to the island way of life and its infrastructure before making a 3 year commitment.
