Companies and individual investors looking around for an American Lichtenstein need look no further than the Puerto Rico tax shelter. The benefits are good enough in general for comparison against similar vibrant and small economies such as Singapore or Ireland, but the location and taxation advantages for American companies and citizens moving to PR are simply incomparable. All the unique taxation mechanisms are explained in detail below.
Federal and Commonwealth taxes are two separate issues. The former have to be filed only when there is earned income from non-PR sources. There is no federal income tax for earnings from within PR, and the commonwealth taxes that do apply are significantly lower or nil.
For example, all new residents whose relocation does not predate Jan 16, 2012 are 100% exempt from income tax on interest and dividends provided by local banks and companies. Even income generated from the PR branches of international corporations and banks are fully exempted. Also, no capital gains tax is applicable for new residents, which means that savings and investments grow faster without Uncle Sam taking a cut of the growth and earnings.
Property taxes are similarly 100 percent exempt for the first five years for new construction. There is a 50 percent exemption for existing properties. There will be no capital gains taxation even if the property value appreciates over time or rental income is generated.
Corporate citizens and service providers have their own set of advantages. Manufacturing industries must theoretically pay corporate income tax at a maximum rate of 7%. Most are able to bring even this low rate further down to 2-4% through various tax credits and incentive schemes available for industries located in designated zones.
PR offers these manufacturers tax credits on material purchase through local vendors. R&D spending, new hires, energy bills, and much more are all eligible for more tax credits. Accelerated depreciation is available for capital expenditures on equipment or machinery. The insurance sector and financial services companies have virtually no regulatory or taxation responsibilities. International banking firms can get complete exemptions from having to pay taxes on income, property or profit distributions such as dividends.
Investment fund managers and consultants whose main source of income is through carried interest will find PR to be a particularly appealing haven. Since it is a Commonwealth of the United States, they can relocate to Puerto Rico and maintain their U. S. Citizenship. They can continue providing services to investors on the mainland without having to pay capital gains tax on carried interest income.
All these and other Puerto Rico tax shelter advantages are only available for new residents who actually spend 183 or more days per year on the island. It's still possible to be a PR resident while commuting to locations on the U. S. East coast. Daily flights from San Juan can reach just about any airport along the coast in a couple of hours.
Federal and Commonwealth taxes are two separate issues. The former have to be filed only when there is earned income from non-PR sources. There is no federal income tax for earnings from within PR, and the commonwealth taxes that do apply are significantly lower or nil.
For example, all new residents whose relocation does not predate Jan 16, 2012 are 100% exempt from income tax on interest and dividends provided by local banks and companies. Even income generated from the PR branches of international corporations and banks are fully exempted. Also, no capital gains tax is applicable for new residents, which means that savings and investments grow faster without Uncle Sam taking a cut of the growth and earnings.
Property taxes are similarly 100 percent exempt for the first five years for new construction. There is a 50 percent exemption for existing properties. There will be no capital gains taxation even if the property value appreciates over time or rental income is generated.
Corporate citizens and service providers have their own set of advantages. Manufacturing industries must theoretically pay corporate income tax at a maximum rate of 7%. Most are able to bring even this low rate further down to 2-4% through various tax credits and incentive schemes available for industries located in designated zones.
PR offers these manufacturers tax credits on material purchase through local vendors. R&D spending, new hires, energy bills, and much more are all eligible for more tax credits. Accelerated depreciation is available for capital expenditures on equipment or machinery. The insurance sector and financial services companies have virtually no regulatory or taxation responsibilities. International banking firms can get complete exemptions from having to pay taxes on income, property or profit distributions such as dividends.
Investment fund managers and consultants whose main source of income is through carried interest will find PR to be a particularly appealing haven. Since it is a Commonwealth of the United States, they can relocate to Puerto Rico and maintain their U. S. Citizenship. They can continue providing services to investors on the mainland without having to pay capital gains tax on carried interest income.
All these and other Puerto Rico tax shelter advantages are only available for new residents who actually spend 183 or more days per year on the island. It's still possible to be a PR resident while commuting to locations on the U. S. East coast. Daily flights from San Juan can reach just about any airport along the coast in a couple of hours.
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