DANGER in moving to Puerto Rico for Act 22, Act 60 tax incentives. It’s no longer a worthwhile option due to the recent amendments which are an unjust, underhanded backdoor tax to the Individual Investors Act that violate the spirit of the decrees
There is a serious danger with the Puerto Rico government enticing people to move, then changing the rules of the game after the hands have been dealt. This is Puerto Rico killing the golden goose, shooting itself in the foot, in a dishonorable bait and switch. As of April 2020, sadly, it appears the Puerto Rican government cannot be trusted to honor its commitments, as they have started exorbitantly ratcheting up the fees, including for the Act 22 recipients who already received their decrees, meaning they were not grandfathered in, and now have to pay a bogus $5000 annual compliance fee, that was formerly $300, and $0 initially. This is a contractual violation that corrupts the sanctity of the decrees, showing the Puerto Rican government cannot be honored to keep its word.
AS A RESULT, WE NO LONGER RECOMMEND MOVING TO PUERTO RICO FOR ACT 22, ACT 60, DUE TO THE UNCERTAINTY IN THE PUERTO RICO GOVERNMENT HONORING OUR DECREES. UNLESS THIS UNCONSTITUTIONAL LAW IS REVERSED, IT WOULD BE UNWISE TO TAKE THE RISK IN MOVING TO PUERTO RICO. IF THEY INSIST ON CHARGING THIS ILLEGITIMATE $5000 ANNUAL COMPLIANCE FEE/TAX FOR FILING A 3 PAGE FORM THAT TAKES 30 MINUTES TO COMPLETE, THERE IS NOTHING TO STOP THEM FROM CONTINUING TO RATCHET UP THE ANNUAL COMPLIANCE FILING FEE/TAX AGAIN IN THE FUTURE TO $30,000 OR $500,000 PER YEAR UNTIL THEY HAVE DRIVEN ALMOST ALL THE DECREE HOLDERS OFF THE ISLAND, ALONG WITH ALL THEIR CAPITAL, ALL THEIR JOBS. THIS WILL DEVASTATE PUERTO RICO MUCH LIKE THE ENDING OF SECTION 936 IN 1996 THAT STARTED PUERTO RICO ON ITS DOWNWARD SPIRAL. THE MAIN PEOPLE THAT WILL BE LEFT LIVING IN PUERTO RICO WILL BE GOVERNMENT WORKERS AND PEOPLE ON WELFARE, AFTER THE PRIVATE SECTOR HIGH-PAYING JOB CREATORS ARE DISCOURAGED FROM STAYING. IF THERE IS NO MEANINGFUL PRIVATE SECTOR, THE ECONOMY WILL COLLAPSE, CRIME WILL SOAR EVEN HIGHER.
Puerto Rico government cannot be trusted on Act 20, Act 22, Act 60
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Act 22, aka Individual Investors Act, annual compliance fee raised from $300 to $5000! Puerto Rico Government Cannot be Trusted!
Act 22 annual compliance fee raised from $300 to $5000!
What is to stop the Puerto Rican government from ratcheting up the annual compliance fee further in the future. This is an indirect, underhanded, backdoor tax on decree holders that shows the Puerto Rican government cannot be trusted. This implies there are 2380 Act 22 Decree Holders. $11,900,000/$5000=2380.Just as the Puerto Rico government tried to circumvent getting the required approval for contracts over $10,000,000, with the Covid-19 testing kits, by instead claiming they were “purchase orders” instead of “contracts,” Puerto Rico government is now sticking Act 22 Individual Investors with another $5000 tax, by raising the annual compliance “fee” from $300 to $5000, an increase of over 1500%!!! These ever higher ratcheting fees have made these programs only for the “super rich.” There is no rational basis for the fee to increase by $4700 in one year.
So now its $750 to apply for Act 22, $5000 to accept Act 22, then $15,000 more annually, consisting of a $10,000 annual charitable donation and $5000 more as an annual filing fee? That’s $20,750 total in the first year, and $15,000 or more every year, something that only the “super rich” can afford. I thought The Society was going to use its unified voice to protect Act 22 people, not represent only the “super rich.” How are the benefits being preserved, when instead the decree holders that are not “super rich” are being squeezed to death with soaring taxes, hidden as soaring annual compliance filing fees? To be clear, if you move to Puerto Rico, and lose money that year as reported on your tax return, you will still be required to pay $15,000 per year to maintain your decree.
1st year costs to join the Act 22/60 Individual Investors Act:
$750 to apply for decree
$5000 to accept decree
$10,000 in forced donation
$5000 fee for annual compliance filing
$20,750 total
2nd and following year costs for Act 22/60:
$10,000 in forced donation
$5000 tax mislabeled as a fee for annual compliance filing *SUBJECT TO BEING RAISED AGAIN IN THE FUTURE BECAUSE THE PUERTO RICAN GOVERNMENT CANNOT BE TRUSTED
$15,000 total
If you have a spouse then your annual outlay is $15,000 x 2 = $30,000.
If you have kids, you will be sending them to a private school for perhaps $5000 per child per year, since the public schools are horribly managed with a low quality education. So if you have 2 kids in kindergarten, you will be paying $40,000 per year, even if you don’t make any money on your investment and lose money! More importantly, there is no guarantee that incompetent politicians won’t keep ratcheting up the annual required fees which started at $0 in 2012, increased to $300 in 2015, then $5300 in 2017, then $10,300 in 2019, now $15,000 in 2020, with no signs of stopping!
Here they are in a table format
ANNUAL PROGRAM TAXES, that are falsely characterized as fees/donations:
2012 $0 – the 1st year of the program
2015 $300 annual compliance tax
2017 $5300 from $300 annual compliance tax, $5000 required donation tax
2019 $10,300 from $300 annual compliance tax, $10,000 required donation tax
2020 $15,000 from $5000 annual compliance tax, $10,000 required donation tax
2021 $20,000? As some politicians are insistent on incrementally raising the annual taxes disguised as fees, there is no limit to this bait and switch
2022 $30,000?
2023 $40,000?
2024 $50,000?
2025 $60,000?
What is to stop Puerto Rico politicians from raising the annual compliance filing fee to $50,000 or more? As the fee is not commensurate with the costs to process the annual reports, it shows this is nothing but an underhanded illegal tax, disguised as a fee, mislabeled as a fee. Why should the annual filing compliance fee go up 100x in 5 years from $50 to $5000? That’s egregiously unreasonable. Similar government arrogance is what killed the tax incentive program in the US Virgin Islands driving us from the USVI to PR.
There are lawsuits in process to fight the recent imposition by the Puerto Rican government changing the annual compliance filing fee tax from $300 to $5000, which was signed by the governor in April 2020, without grandfathering in those who accepted the their decrees before that date. Unless this $5000 annual compliance filing fee tax change is removed, one would be foolish to move to Puerto Rico, since the government can do an end run around the decrees, making them pointless. Taxation by unjustifiable excessive fees is still a tax.
https://decrypt.co/26245/puerto-rico-new-law-crypto-tax-more-expensive
New law threatens Puerto Rico’s status as crypto tax haven
By Jaime Chacon3 min read
Apr 21, 2020
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Puerto Rico has updated the law that governs the tax incentives for crypto entrepreneurs and others.
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Governor Vazquez has increased the yearly fee to qualify for such incentives from $300 to $5,000.
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Local tax consultants say the new fees dissuade new crypto investment on the island, given the current state of the market.
Crypto investors and entrepreneurs looking to take advantage of Puerto Rico’s favorable tax incentives will now find it more costly to do so.
Late last week, Governor Wanda Vazquez signed Law 40-2020 into effect, which made a key change to the rules that govern tax incentives for new residents. Previously, investors who moved to the island and applied for these incentives were required to pay a yearly fee of $300 for the privilege. The new law increases that yearly fee to $5,000.
The Puerto Rican government expects to generate $11.9 million in fees with this rate increase in an update to what was formerly known as law 22-2012. The new legislation also provides a tax contribution reduction of 3% for those who earn $100,000 or less.
“The increment in maintenance costs for the decrees raises the bar for those who take part and for potential investors looking to relocate to the island for the tax benefits,” Giovanni Méndez, managing partner at Puerto Rican tax consulting firm Geo Tax, told Decrypt.
“The higher fee assumes that all of the participants are millionaires who hold fortunes with immediate liquidity. Those of us in the community know that this is not the case for a large part of investors and entrepreneurs that have relocated to the island,” he said. Indeed, the fees and other requirements apply to anyone who has lived in Puerto Rico for at least six months and applies for tax relief for his or her business.
According to Geo Tax, the total cost of moving to the island to save on taxes includes a $750 filing fee, $5,000 special fund fee once approved, $10,000 yearly donation (split in two), plus the new $5,000 yearly fee.
“Regarding investors in the cryptocurrency market, the increase in costs affects whether some will remain on the island due to the volatility of the market and changes in value,” said Méndez. “The new Incentives Code brought sections that incorporate benefits to the crypto and blockchain markets which is something positive, but it clearly contrasts with this last legislation,” he said.
It’s these tax incentives that have brought entrepreneurs from across various industries, including cryptocurrency, to the US commonwealth. Co-founder of EOS Alliance Block.one Brock Pierce and gold proponent (and Bitcoin skeptic) Peter Shiff, for example, make Puerto Rico their home for at least half the year.
Just last month, during the CoinAgenda Caribbean conference in San Juan, Pierce reiterated his optimism that Puerto Rico can still become the “blockchain island”—a beacon for the industry—that was once promised.
NEXT…
https://coingeek.com/puerto-rico-changes-gears-on-digital-currency-haven-status
Business 23 April 2020
Puerto Rico was once seen as a perfect location for digital currency startups. It had considerable tax incentives in place that benefited investors and entrepreneurs, which led to an increase in the development of business solutions in the U.S.-controlled territory. However, either by design or due to economic shortcomings caused by the coronavirus and other disasters, Puerto Rico needs to find new sources of revenue. As a result, a new law has been approved that will change the structure of the digital currency tax incentive programs in place.
Puerto Rico Governor Wanda Vazquez approved a new law last week, Law 40-2020, that alters the way tax incentives are provided to new residents. Spanish media outlet El Nuevo Día (The New Day) points out that the previous annual fee of $300 for those who moved to the island and applied for the incentive has been substantially increased. It has now jumped up to $5,000, and is expected to generate an additional $11.9 million for the government. In addition, there is also a new tax contribution reduction equal to 3% for anyone who earns $100,000 or less.
In correspondence with Decrypt, Puerto Rican tax consultant Giovanni Méndez, representing tax consulting firm Geo Tax, says, “The increment in maintenance costs for the decrees raises the bar for those who take part and for potential investors looking to relocate to the island for the tax benefits. The higher fee assumes that all of the participants are millionaires who hold fortunes with immediate liquidity. Those of us in the community know that this is not the case for a large part of investors and entrepreneurs that have relocated to the island.”
Now, for anyone wishing to move to the island, the upfront expenses are much higher, somewhat negating the existing tax incentives. There is a $750 filing fee, a $5,000 “special fund fee” if the filing application is approved, a $10,000 obligatory annual contribution (with the possibility of having the fee made in two payments) and the new $5,000 fee.
The structure will be detrimental to entities in the blockchain and digital currency spaces, and Méndez adds, “Regarding investors in the cryptocurrency market, the increase in costs affects whether some will remain on the island due to the volatility of the market and changes in value. The new Incentives Code brought sections that incorporate benefits to the crypto and blockchain markets which is something positive, but it clearly contrasts with this last legislation.”
The changes could force many who have decided to call the territory home to pack up and look for better, cheaper alternatives. Puerto Rico has been slammed by a number of major storms in recent years that have almost decimated its infrastructure, and the U.S. has been indifferent in providing a considerable amount of relief. The weakened foundation and the new fees might be enough to thwart Puerto Rico’s plans of being a major digital currency hub.
NEXT…Key part translated from Spanish…
imposes a contribution of $5,000, previously $300 – for the delivery of each annual report presented by the citizens benefiting from the benefits. of the Law to Encourage the Transfer of Individual Investors to Puerto Rico, previously known as Law 22-2012.
That last increase will generate $ 11.9 million new, according to Soto told the press.
Act 20, Act 22, Act 20 of 2012, Act 22 of 2012, Act 60, Act 2022, Acts 2022, Act 20/22, Acts 20/22, Puerto Rico tax incentives, Individual Investors Act, Export Services Act, capital gains, dividend income, exempt 