As has been widely reported, Puerto Rico’s Act #20 and Act #22 provides incentives for high net worth U.S. citizens to move to Puerto Rico and potentially reduce their 39.6% federal income tax (plus any applicable state tax) to a 0% – 4% Puerto Rico income tax rate. In order to achieve tax savings under Act #20 and Act #22, the new residents of Puerto Rico must comply with complex Puerto Rico and Federal tax rules that apply to determine (i) whether they are bona fide residents of Puerto Rico under the Federal Internal Revenue Code; and (ii) whether they can derive income that is both eligible for a 0% – 4% tax rate under Act #20 & Act #22 and also excludable from federal taxation under Section 933 of the Federal Internal Revenue Code.
The proper structuring of business operations and investments for compliance with Act #20 and Act #22 requirements and the avoidance of unexpected tax costs requires an experienced and knowledgeable legal team. That is where we come in.
Ferraiuoli’s Act #20 & Act #22 Practice Group provides sophisticated tax and legal advice to individuals seeking to relocate to Puerto Rico by taking advantage of these incentives. Our team’s deep experience in this complex area of the law makes us the “go to” advisors for a number of individuals who have already moved to the Island and are benefiting from this economic development program. Our services in this area include:
- assessment of compliance with Puerto Rico residency requirements under the Federal tax code
- assessment of potential tax benefits under Act #20 & Act #22
- identification of other Puerto Rico tax exemption and tax credit programs that may be combined with Act #20 & Act #22
- negotiation of Act #22 tax exemption grants
- structuring of business operations and Investments to properly achieve and maximize tax benefits under Act #20
- organization of Act #20 companies
- negotiation of Act #20 tax exemption grants
- Puerto Rico and federal estate tax planning for Act #22 individuals
- establishment of asset protection trusts for Act #22 individuals
- Since 2012, the Tax Practice Group has been ranked as one of the leading tax law groups in Puerto Rico according to Chambers & Partner’s Global and Latin America Guides.
- Our attorneys have been speakers at multiple investment forums organized by the Government of Puerto Rico to promote the benefits available under Act #20 & Act #22.
Representative Matters and Transactions:
- Acted as counsel to a U.S. based transportation business in the establishment of a Puerto Rico call center under Act #20 to service its U.S. operations.
- Represented a securities trading firm in the establishment of a Puerto Rico Act #20 company and the relocation of its principal owners to Puerto Rico under Act #22.
- Acted as counsel to multiple U.S. based consulting firms in the establishment of Puerto Rico Act #20 companies and the relocation of their principal owners to Puerto Rico under Act #22.
- Represented multiple U.S. and foreign citizens relocating to Puerto Rico under Act #22 in the establishment of asset protection trusts and in the development of Puerto Rico and federal estate planning strategies.
- Acted as counsel to multiple U.S. based investors in their relocation to Puerto Rico under Act #22, and in the establishment of investment vehicles to purchase Puerto Rico based businesses and assets.