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?

Transfer Pricing Webinar

Transfer Pricing Webinar

PR Advantage is pleased to offer a free webinar series on transfer pricing!

What is transfer pricing?

Some entrepreneurs who relocate to Puerto Rico have existing businesses that continue after their move, which gives them the opportunity to use a PR Export Services company to provide management and other services from PR. Once they have relocated to PR, formed a new business here, and applied for the Act 60 Export Services tax incentive, their new PR company becomes a service provider to the pre-existing business.

Such business owners may have controlling interest in both companies, which means the relationship of the two businesses is not “arm’s length”, from a tax perspective. If this describes your strategy, you may need to consider transfer pricing. It doesn’t affect everyone who moves to Puerto Rico, but for some business owners, it can be an important consideration. This page provides a bit more detail.

Free Webinar Schedule

Because many of our clients have had questions about transfer pricing, PR Advantage has partnered with an experienced firm to offer a free, educational webinar series about transfer pricing. Come and get your questions answered by an expert who has helped many other Act 60 applicants. We are offering the following timeslots:

Session dateRegistration link
Tuesday, February 14, 20234-4:30pm PR time (12-12:30pm Pacific time)
Wednesday, February 15, 20231-1:30am PR time (12-12:30pm Eastern time)

FAQ

Here are some common questions about this issue, as a preview for what we will discuss on the webinar. We encourage you to send additional questions in advance of the session, to ensure the best chance that we can accommodate them.

Q: What is transfer pricing?A: Fees paid by a company you own or control to another company you own or control.
Q: Why does it matter?A: This type of vendor relationship is not “arm’s length”, because you control both sides of the transaction.
Q: When would this affect you?A: In an audit, transactions that are not “arm’s length” could result in fees, penalties, and back taxes owed.
Q: What can you do about this?A: Obtain a Transfer Pricing Study from a qualified 3rd party vendor to set the prices one of your companies charges the other company.

We look forward seeing you on the webinar! Don’t forget to send us your questions in advance.

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.

Get Started

Puerto Rico’s Economy: Land of Opportunity

Puerto Rico’s Economy: Land of Opportunity

Puerto Ricos Economy

Most of what has been covered in the news lately is Puerto Rico’s debt, and there is no doubt that this is a serious issue. Currently, the new PROMESA board is at work to determine the plan to restructure Puerto Rico’s debt, and plan what changes may go with it to ensure ongoing accountability.

What is not included in these news reports is the stunning opportunities for new business growth that the island and all its many advantages make possible. In addition to incredible, world-class tax incentives, Puerto Rico is also attractive in other ways. These opportunities are very likely to continue since they are part of the means for improving the economy long-term. (There have been no signs that the recent passage of the PROMESA bill by the US Congress will negatively impact the ability or intention of the Puerto Rican government to continue to incentivize economic growth and recovery through the excellent legal tax advantages that it currently makes available to its legal residents.)

Beneficial for Businesses

Puerto Rico is a great place to do business for many industries. A number of fortune 100 companies have established operations here, including 10 of the world’s top 20 pharma and biotech companies; 2 Fortune 1000 companies are even headquartered in Puerto Rico. And out of 174 active Foreign Trade Zones, Puerto Rico ranks 13th in imports and 11th in exports (report reference from 2012).

Additionally:

  • Puerto Rico’s tax incentives are world class!
  • All needed infrastructure is in place.
  • The tax incentives are creating an entrepreneurial environment, where it is easy to meet potential business partners.
  • For many people, Puerto Rico’s weather, beaches, and beautiful places to live make it a very desirable place to relocate, so some employees and business partners may be easy to convince.
  • PR has a bilingual population.
  • One of the best engineering schools in the country is located in Mayaguez, and US companies heavily recruit all types of Puerto Rico STEM graduates.
  • Puerto Rico is very accessible by air travel, with many non-stop flights daily from New York and other major US cities.

 

Puerto Rico Has the Most Developed Economy in Latin America

Puerto Rico’s annual gross domestic product is about $100 billion. The economy is already strong in the following sectors:

  • Manufacturing
  • Pharmaceuticals
  • Electronics
  • Processed foods
  • Clothing
  • Textiles
  • Service
  • Tourism

Technology is a growing industry, and some predict it may be the next big wave.

Future Plans for Economic Development

Puerto Rico is currently still losing some of its most highly educated residents to higher paying jobs in other locations. Many of the plans to improve the economy involve creating additional and more substantial jobs locally, to retain top talent on the island. Attracting more business to Puerto Rico naturally also impacts the economy indirectly by creating more services jobs to support these businesses and new residents relocating to Puerto Rico.

The PR government’s plans include encouraging growth in Manufacturing, Services, and Tourism businesses. Act 73 (the Economic Development Incentives Act) and Act 20 (the Export Services Act), have been put in place to attract new businesses of these types to the island, to create new jobs for Puerto Rican residents, and to boost the local economy. The Tourism Development Act has been put in place to offer tax credits and exemptions for businesses constructing and operating tourism endeavors.

Puerto Rico is fortunate to be located in an advantageous geographic position along the Mona Passage, between the Atlantic Ocean and the Panama Canal. Puerto Rico’s Port of the Americas is designed as a modern, containerized import/export and transshipment cargo facility. Located in Ponce, Puerto Rico’s second largest city, on the southern coast, it is also very near to Mercedita International Airport (PSE).

With Act 214, Puerto Rico embraces innovation via the Science, Technology, and Research Trust. The Trust provides access to grants for projects involving technology commercialization, research, and the creation of science and technology jobs.

Plans are also underway to transform the former Roosevelt Roads Navy base into a diverse community including tourist attractions, residential properties, schools, and hospitals.

Read more about these and several other plans in progress to stimulate Puerto Rico’s economy in the official government report. Feel free to contact us with any questions.

References:

Puerto Rico government report on current economic indicators

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.

Get Started

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Why Puerto Rico, and how do the incentives work?

Puerto Rico Labor Laws

Transfer Pricing 

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