Charity Donation Requirements

Charity Donation Requirements

Most Puerto Rico investors who apply for Act 60 or Act 22 must donate to a Puerto Rico charity each year.

Note: there is no charity requirement for business owners if you chose not to pursue the Investor incentive.

Rules for Act 60 and Act 22 Charitable Donations

  • Under Act 60, Investors are required to donate at least $10,000 annually, starting in their second year.
    • $5,000 of this must go to a charity on the CECFL list. This indicates it is an approved non-profit that helps to alleviate child poverty in Puerto Rico.
    • The other $5,000 can go to any approved PR non-profit (certified under 1101.01 of the PR law, which is equivalent to 501(c)(3) in the mainland US).
    • As organizations on the CECFL list are also qualified non-profits, it is acceptable to donate the full $10,000 to a CECFL charity. Note that there is some conflicting information on this point on some websites – see below for more details.
  • Many Act 22 Investors also have a requirement to donate $5,000 annually to PR charities.
    • No portion of this is required to go to a CECFL non-profit.
  • For all Investors, there are a few additional rules:
    • The charity cannot be an organization that is owned or controlled by the investor who is donating, or by that investor’s spouse or partner, descendants, or ascendants.
    • You can donate to multiple charities or to just one, as long as the total adds up to at least the minimum required under the Investor program you are in.
    • The deadline each year to complete your donations is December 31 of that year.
    • Receipts must be retained in your records to show evidence of the donations.

Can the full Act 60 donation can go to a CECFL organization?

Yes, it can. Some experts understand the Act 60 law to mean that only half can go to a CECFL charity. Sometimes tax and legal professionals interpret the law differently from the attorneys who work for the PR government. It’s important to find out how the PR government views the law.

Because there is differing professional advice on this point, we consulted with a DDEC attorney for clarification. DDEC is the PR department that administers the tax incentives program. DDEC advised us that investors can allocate the full $10,000 donation to a CECFL entity if they choose.

How do you find a Puerto Rico charity you can trust?

Sites such as Guidestar can help you to identify if a non-profit is transparent in their spending. We prefer to research charities before donating, to ensure that the non-profit has a good, honest reputation. After careful consideration, Puerto Rico Advantage has chosen to endorse Tech My School and is evaluating other non-profits for possible endorsement. You can find out more by downloading a recent webinar we hosted in partnership with Tech My School, or by watching a recording of it posted to YouTube.

Puerto Rico Residency – Free Webinar

Puerto Rico Residency – Free Webinar

Establishing legal, “bona-fide” residency is the first step in a successful strategy to take advantage of Puerto Rico’s tax incentives. Maintaining it ongoing is also critical! Should you be audited and found to not be in compliance with the Puerto Rico residency requirements, you could be subject to significant back taxes and penalties.

For a presentation used in our recent free webinar, click here to download the PDF.

Audit Risk – Recent Developments

Even if you have already moved to Puerto Rico, you may be at risk of not be fully compliant with the Puerto Rico residency requirements. The IRS is staffing up to focus more on audits of Puerto Rico residents. It is more important than ever to ensure your strategy is sound and that you’re sticking to it.

It is fairly easy to comply with the rules for Puerto Rico residency. Invest a little time in educating yourself, and then check now and then to ensure you are maintaining this all-important part of your tax reduction strategy.

Questions – How to Become a Bona Fide Resident of Puerto Rico

We recently co-hosted a free webinar with an experienced CPA firm, to explain in more detail how to stay compliant with the residency rules so that your PR tax breaks can continue.  If you missed it, you can click here to download the PDF and we do intend to schedule a replay in the future.

The webinar discussed topics such as:

    • What is the minimum you need to do to first establish Puerto Rico residency?

    • Are there exceptions to the 183-day rule?

    • Can I keep a house outside of Puerto Rico and still be a legal PR resident?

    • What happens if the IRS audits you and finds you not to be a bona fide resident of Puerto Rico?

    • Is there a way to “game the system”? Why is this risky?

    • What are the benefits of moving to PR?

    • Does moving to PR automatically mean I will pay lower taxes?

Blockchain Unbound 2018 Interview with Damaris Rivera

Blockchain Unbound 2018 Interview with Damaris Rivera

Damaris Rivera from Puerto Rico Advantage interviewed with theCUBE at the Blockchain Unbound 2018 event.

We Can Help

Our company helps people like you take advantage of Puerto Rico’s excellent tax incentives!  We can help you determine which tax incentives are right for you, help you plan your residency and relocation strategy, and simplify the entire process for you.

Contact us for a free initial consultation.

Navigating Puerto Rico’s Taxation Opportunities

Navigating Puerto Rico’s Taxation Opportunities

Puerto Rico: Taxation as a US Territory

As a US territory, Puerto Rico is part of the United States of America, but without the same legal status as one of the States. Federal laws apply and can override local laws, much as the legal system works in any State. However, Puerto Rico residents are subject only to local taxation for work performed on-island.

For US citizens, who are usually subject to double-taxation when living abroad, Puerto Rico offers a unique and very attractive situation for those that qualify for Puerto Rico’s tax breaks. Some US citizens can pay single-digit tax rates on much of their Puerto Rico income!

Obtaining these benefits can be somewhat complex, and that is where we come in. We can help you to analyze whether the Puerto Rico tax incentives can work for you, and estimate what kind of tax savings you might expect from a Puerto Rico relocation. Then, we can help you every step of the way to check out Puerto Rico living, set up your business here, apply for whatever tax grants are appropriate for your situation, and even manage your business ongoing, if you require that.

 

Taxation for US Citizens

Under the US’ section 933 exemption, Puerto Rico residents are exempt from paying some types of tax to the US federal government. On an individual level, a resident of Puerto Rico who is a US citizen is exempt from paying personal income tax for work performed in Puerto Rico, but would be required to pay US federal payroll taxes on any salary that they draw (Social Security, Medicare, etc.).

A US citizen who is a legal resident of Puerto Rico and earns part of their income outside of Puerto Rico would pay US federal income tax on that income only, and would need to file with the IRS only regarding that income. If a US citizen who is a legal resident of Puerto Rico earns all of their income on-island, they may not need to file with the IRS at all.

 

Other Taxes in Puerto Rico

Most municipalities impose an additional 1% tax, with some exceptions. This is similar to paying a city tax in the States.

Puerto Rico has an estate tax of 10%, which applies to those born or naturalized in Puerto Rico. US citizens who have relocated to Puerto Rico but were not born or naturalized here must pay the normal 40% US estate tax rate.

The sales and use tax rate in Puerto Rico was recently raised to 11.5%.

Contact us with any other Puerto Rico tax-related questions you may have.

We Can Help

Our company helps people like you take advantage of Puerto Rico’s excellent tax incentives!  We can help you determine which tax incentives are right for you, help you plan your residency and relocation strategy, and simplify the entire process for you.

Contact us for a free initial consultation.

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How to maximize Puerto Rico's tax incentives

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* What health insurance works in both Puerto Rico and in the mainland US? 

* The Basics of Transfer Pricing

* The Rules of Puerto Rico Residency

* Puerto Rico Charitable Donation Options

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