Act 22:
At 22 has the purpose of attracting persons who have not been residents of the island to relocate and establish their residence in Puerto Rico.
Benefits under Act 22 (as recently amended) include:
- All interest and dividend income (including interest and dividends earned indirectly through Authorized Investment Companies or International Banking Entities) earned by a Puerto Rico Resident Investor during the Tax Exemption Period will be 100% exempt from all Puerto Rico income taxes.
- The Capital Gains realized during the Tax Exemption Period by a Puerto Rico Resident Investor that are attributable to the increase in value of securities occurring during the Tax Exemption Period will be 100% exempt from all Puerto Rico Income Taxes.
- The Long Term Capital Gains realized by a Puerto Rico Resident Investor after ten (10) years of the establishment of residency in Puerto Rico (but on or before December 31, 2035) that are attributable to the increase in value of securities occurring prior to the Tax Exemption Period will be subject to a 5% tax in lieu of any other Puerto Rico Income Taxes.
In order to be eligible for the benefits available under Act 22, the individual must be an investor that has not been a resident of Puerto Rico, as this term is defined by the Internal Revenue Code for a New Puerto Rico of 2011, at any time during the fifteen (15) year period ending on January 17, 2012 and that become residents of Puerto Rico, on or before December 31, 2035 (“PR Resident Investors“).
The tax incentives provided by Act 22 will apply to the period beginning on the date on which the individual investor becomes a PR Resident Investor, and ending on December 31, 2035 (the “Tax Exemption Period”). The individual investor must request and obtain a tax exemption grant to enjoy the benefits of Act 22. This notice only discusses the Puerto Rico taxes applicable to the PR Resident Investors. Individuals that are citizens or permanent residents of the United States must consider whether any federal taxes will apply under the U.S. Internal Revenue Code of 1986, as amended.
These laws, in addition to other incentives offered by the Government of Puerto Rico (such as the Puerto Rico Economic Incentives Act, which provides incentives for the industrial sector, the Puerto Rico Tourism Development Act, the Puerto Rico Film Incentives Act, to mention a few), provide an attractive environment for businesses in multiple sectors. To further discuss or obtain additional information on eligibility or how to apply for the benefits here discussed, please feel free to contact us at your convenience.
Last update: May 31, 2013