Incentives to Individuals that Relocate to Puerto Rico

Act 22 of January 17, 2012 known as the Individual Investors Relocation to Puerto Rico Incentives Act (“Act 22”)

• Act 22 provides tax incentives to individual investors that have not been residents 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 Puerto Rico Resident Investor, and ending on December 31, 2035 (the “Tax Exemption Period”).
• The Tax Exemption Benefits of Act 22 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 exempt from all Puerto Rico income taxes.
  • The Long Term 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 exempt from all Puerto Rico Income Taxes.
  • The Long Term Capital Gains realized by a Puerto Rico Resident Investor, after ten (10) of the establishment of the Puerto Rico residency but on or before December 31, 2035 years, 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.