Everything You Need to Know About Puerto Rico!

Level 2 - Value Investor

Welcome Avatar! Brain is here to explain everything you need to know about Puerto Rico. The majority of our readers are American so this will likely be of use for some of you. For one reason or another, Brain prefers bullets so you can copy paste those into a word document for easy reference later.

Moving to Puerto Rico - Taxes

The main reason to move to Puerto Rico is income. The second reason is income. The third reason is also… income. Puerto Rico is a US “Tax Haven” due to the creation of something called “Act 60”. Instead of walking through all the changes the below is what you need to understand.

Simple Rules Before Starting

1. You have to stay in Puerto Rico for 183 days out of the year. If you go international that can actually lead to reducing the number from 183 days. Being honest, I haven’t looked into it but there are some people here who pull off ~93 days in Puerto Rico, majority international and 90 days state side who can claim residency in Puerto Rico. This is too much headache, if you come here would assume you stay for 183 days to make sure your books look good

2. Assume that you’re here until 2025 at minimum. You can’t show up for one year pay no tax and leave. When you come here assume a three year minimum. 2025 is being used in this example since that’s the minimum time frame for the business in PR that is now set up

3. Hire an accountant and lawyer if you have a business. This may cost a few thousand dollars but if you’re smart it should be worth the headache

4. You need to donate $10,000 a year to a Puerto Rico charity, will have accountants/lawyers suggest a place for this

5. All in assume that it’s a minimum of $20,000 to get set up on an annual basis. $10,000 donations, $10,000 in “other” costs such as an accountant and some lawyer fees for questions that inevitably come up

6. You must buy a residence within 2 years of moving here.

Big Picture is that you will 1) be here for 183 days, 2) you assume you are here for three years minimum otherwise you have to pay full tax, 3) get an accountant/lawyer for any business, 4) you will pay a $10,000 to a PR charity and 5) you will buy a property in Puerto Rico within 2 years

Business Tax Benefits

• Businesses can lower their taxes to 4%. This means if you have an online business that makes $1M or $10M, the tax rate is still 4%

  • The caveat here is the income generated by Puerto Rico residents is taxed differently (normal tax rates). If you run a business in Puerto Rico you need to know where your customers are so you can prove that 95% or 100% of them are not in Puerto Rico. The 5% that are in Puerto Rico has normal tax

• Capital gains taxes are 0% for your business. If you sell your Puerto Rican entity for $1M or $60M that money is tax free. This assumes you follow all the rules appropriately

• Depending on your business line, if you transfer a business from the USA to Puerto Rico, they may assign a “value” to the firm upon moving. If you have trademarks and other items that are worth say $1M, then when you sell the company later, there is a mark to market difference. This one is impossible to calculate for you. If they say your business is worth $1M and you move and sell it for $3M it means the value accrued in Puerto Rico ($2M) is tax free, the remainder is not

• One negative, you have to pay yourself a “reasonable salary”. To keep it simple assume your salary as the CEO of the company must reach the maximum social security limit. You can go lower but it’s a good baseline assumption. For 2022 the number is $147,000 for your salary. This would be taxed at normal federal rates.

• Final one on the set up side. While you can live in Dorado and have an office in San Juan, it is smarter to live in the same city that your office is located (you can use a virtual office for ~$100 a month). If you work from home from Dorado all day but your office is in San Juan, the municipality may come after you for taxes since you’re working in Dorado not San Juan. Better safe than sorry. Get a virtual office in the city you plan on living in.

Big Picture is the following: 1) tax rate for biz income is 4%; 2) capital gains on selling business is 0% unless a value is assigned due to “transferring” the asset (think of this as an exit tax of some sort). Once again please see a lawyer/accountant for the second part; 3) you must have a reasonable salary that is fully taxable, this usually means you pay yourself a salary that is up to the social security limit as the CEO of your company ($147K as of 2022). No real tax savings here and 4) put your virtual office in the same city as your personal residence

Individual Tax Benefits

• No capital gains on trading/investing. That’s right! Zero Percent legally! If you buy and sell computer coins it doesn’t matter if you made $1 or $100M… it is tax free.

  • This is also marked to market. If you move to Puerto Rico with the S&P at 4,500 that is the mark to market. Anything above that is tax free. If you bought it at say 4,000 and it goes to 5,000… 500 would be taxed at normal long-term cap gains and the other 500 would be zero percent

• No dividend tax. While the government is looking to change this as of today it is zero percent tax on all dividends.

  • As an important note, historically individuals are “grandfathered in”. Prior to Act 60, there were other acts that only required a $5,000 charity donation

Big Picture Here: 1) All future investments even if short term trading are tax free; 2) remember that you are marked to market when officially a Puerto Rican resident, so ideally the prices of all your holding drop on that specific day and 3) Dividend taxes may change and historically they grandfather people in.

Making Sure You’re Compliant - Logistical Stuff

This is obvious to most. If you move to Puerto Rico it means you do have to move everything but for the highlights see below

• Ideally your only home is in Puerto Rico. Otherwise you will need to lease/sell other Real Estate items. Hard to argue you live somewhere else if you only own property in Puerto Rico

• Family/spouse/kids need to move with you as well and kids should go to school in Puerto Rico

• Get a Puerto Rico drivers license and go register to vote in Puerto Rico which removes your right to vote in the USA

• All major expensive items should be with you. Wise to close any lock boxes and transport to Puerto Rico

• Cell phone can be the same number just change the billing address to Puerto Rico or change service providers

• Join a gym or tennis club or anything else you use for consistent activity

• Change all addresses to Puerto Rico (future applications when you book hotels etc.)

• Close all bank accounts in the USA and use a Puerto Rico bank. Some US banks do have Puerto Rico branches which would be faster for you. Make sure the account is labeled as Act 60

• Online stock accounts are fine, simply change your address to Puerto Rico

• Only donate to Puerto Rico Charities to stay on the safe side

Lifestyle!

Life in Condado/Dorado is low key and remember that you’re moving to an island (I’m an islannddd boiii!). If you move to San Juan expecting it to be like Miami or New York you should not come here. Imagine you’re living in a less developed version of Hawaii. Laying out the good and the bad here followed by some opinions as each situation is different. Since the goal is to be balanced will start with the negatives which you should never do in any work environment or business environment

The Bad!

• Things move slow. If you go to a restaurant, supermarket, etc expect service to be much slower than the USA. Remedy: go on off hours to the super market such as Monday and try to eat dinner earlier so you’re one of the first customers. This makes service at least 50% faster! You can also simply order delivery and order that 20 minutes earlier than you usually do

• Infrastructure “es mal” (bad). Inside of the nice areas (Condado/Dorado) is pretty much up to par. On the outside the building look worse due to storms/buildings made of stone etc. If you look at the roads, that would probably be the worst part of it. The outside of the building isn’t a big deal since it’s just older stone but the roads are a definite negative. Don’t try to run at night

• Less options for food and cuisine in general. Once again, you’re living on an Island boiii so you should expect to eat more seafood, more mangos/papayas and less harder to find vegetables such as Kale. Remedy: there are some organic food stores opening here where you can find Kale and other state side products.

  • According to some locals there are not many “Asian” options which might impact some of you. Have not been impacted by this as there are several sushi spots such as Yoku that are solid and for the culture a Korean BBQ place called Ujeong

  • If you need Asian food then this will probably be a headache for you. If you’re like most Americans and eat Sushi/Asian food once in a while, it won’t be an issue

• Shopping takes more time. If you’re looking for everything to be in stock, it will be hard. You may be forced to wait for a month if you’re looking for something specific. Remedy: become more flexible with what you need. No need to get a 80” TV if you can operate with 55”. No need to get the latest iPhone at a store, just pre-order it (plan ahead).

• Healthcare is also slower. Insurance costs are a ton lower (even for good insurance expect a 40% decline in your costs. The downside is everything moves slower once again (if you’re in bad health you shouldn’t come here and should live in a major city with the best healthcare since health is certainly more important than money). Remedy: If you’re a healthy person, this won’t be an issue at all and most healthcare providers allow for USA services. You can just fly to Miami if you need something in particular)

• This is not a “Party City”. If you’re in that stage of your life, it will not be a good time for you. This is more of a “family city” or “go to the beach and chill city”. If you’re looking for party expertise it sounds like Duck is on the younger side and as he goes through the City he’ll find areas that would be of interest! As a guess though, it is easier to fly to Miami and back since you can do a 24 hour trip without it counting (1 hour rule for Puerto Rico - double check with your lawyers and accountants of course)

• In terms of people it isn’t smart to explain that you’re part of Act 60 to a random local. If you meet someone who is there for the same reason and it is obvious, sure you can mention it. Would avoid talking about your business life with general locals since many of them don’t like the rules. Just like in the USA where you don’t talk about politics especially if you already know you don’t agree. Being extra extra extra careful here, this isn’t a safety concern or anything like that, it just doesn’t make any sense to blab about your situation to local Puerto Ricans

The Good!

• Weather is insanely good and if you enjoy water activities (like a cartoon brain), you will have a lot of day time activities: surfing, kite boarding, boats and more. The regular nature walks are also great! You can go on hikes, jump off water falls and the beaches are significantly cleaner than the beaches in the USA most USA beaches are full of garbage and congested

• Internet! Was worried here and the internet is perfectly fine. People have complained quite a bit about this and there have been no issues. As an estimate expect a few hours of bad internet/out internet every 2 months. The speed is actually faster than a lot of the internet speeds in the USA if you are willing to spend ~$150-200 a month

• Hospitality and Services are great! A huge benefit of being on an island that is more Latin than USA based. You can get massages/spas, chiropractors, haircuts/facials etc. for significantly less money without sacrificing on quality. As mentioned, you’re basically living in Hawaii in terms of a lifestyle design

• You don’t need to speak Spanish to get around. If you do speak Spanish you can fit in a bit more and your dating life would likely improve dramatically

• Safety is Great! This was one big concern and honestly it is safer than a major city in many ways. If you don’t do anything foolish like live in a cheap area or walk around as an obvious “Gringo” in a nightclub that has no english speakers flashing your cell phone. General areas to say: Ocean Park, Condado and Dorado. There are other areas like Isla Verde but, if you’re coming here for the Tax Haven items you’re not going to live in this area since the ROI on moving here doesn’t make sense.

• No Noise Issues! If you don’t live on a busy street there is limited noise pollution. This is a complaint from people who live in the central area that is typically packed with tourists. You don’t want to live right next to La Plazita or in front of Serafina. While you’re in the center of the action that’s more of a curse than a blessing as it’s usually packed with loud music frequently playing

Who is Puerto Rico a Good Fit For?

Now we’re at the final stretch cartoons and frogs! Three is no way this is going to cover everything but that’s why you come here. For honest cold hard facts even if the writing set up is different the correct recommendations need to be made

• Starting with income, if you qualify for the export rules in Puerto Rico you can assume a 7-10% total tax rate (you have to pay yourself a taxable salary, you have the donations and all the other costs). Instead of plugging in 4% be conservative and say 10%. Ask yourself if the tax savings are worth it. By way of example if you pay $1M in taxes in the USA at a 50% rate, is $800K US Token (40%/50% times $1M) worth it for you? If you’re already worth $20M US Token probably not. If you’re seeing an inflection and are only worth $1M it probably is.

• Asset based compounding is a big factor here as well. If you are worth say $3 million US Token and are willing to let compounding do its thing for 5 years, you could save well more than a million since the compounding is tax free! Imagine having $3M grow to $10M and paying zero tax on the $7M you made. It’s a big move and $10M is a different quality of life compared to $3M for the next several years

• Certainly not one to give “family advice” since that’s too personal. The way to describe it is as follows: 1) if your kids are young they won’t remember much of being in Puerto Rico and 2) if your kids are in their teenage years, probably not smart as they will have a hard time meeting other winners due to limited activities compared to a major US city. If safety is a concern, that would not be on the list here. Feel free to check it out but beyond the 3-4 homeless guys on a few busy street corners there isn’t much to worry about.

The basic conclusion that seems to resonate is that you need to be confident you can change your lifestyle within 3-5 years. If you’re moving to Puerto Rico to become a trader that probably won’t work out for the vast majority. If you’re moving to Puerto Rico with a business and investments you can gain significant ground. The word significant means you can triple your net worth. If you are worth $1M and can see a clear path to $3M that is interesting. If you’re worth $4M and can get to $12M that’s also compelling. If you’re coming here to turn $1M into $2M in five years that makes little sense due to all the logistics and headaches of setting up in Puerto Rico. Conceptually, only come here if it is going to change your life in a meaningful way. If you can turn $20M into $30M, that doesn’t make sense due to the limited change in lifestyle from $20M to $30M

Lifestyle Costs

Once again all situations are different! If your provide some information on your situation, a budget can be estimated so below are some good ranges to be aware of if you want to live in a nice area of town

• Rent assume $2,000 minimum with up to $5,000 if you’re looking for 3-4 bedrooms in a nice area. You can also go crazy and spend $3,000 a night at the Ritz in Dorado

• Dinner and going out expenses assume it is about 40% cheaper than the USA at the nicer places. Instead of spending $150 a person it can be as low at $75 or up to $100

• Supermarket costs are the same as the USA the only difference is the organic veggies will be more expensive. Fruits and quick food will actually be cheaper

• Strongly against eating at "low-tier” food places. For some reason it is the same cost as the USA with much worse quality. Stick with the higher tier since it’s cheaper and the quality is the same as the USA

• Good quality insurance will be under $300 a month per person and includes dental MCI is a good option as they allow for use in the USA as well due to a partnership with United health

• Direct flights are available to texas, florida, new york, Canada, Spain, Colombia and several other areas. Please note that American is the main airline for the island

• Low end say you’re single: $5K a month is doable for a high quality of life. If it’s you and a spouse probably closer to $7K and if you have a family of three or four probably closer to $10K. As a reminder, this assumes you are living in the better part of town, in a good apartment, going out more than once a week and on top of that doing some water sports/massages and other health and wellness activities. Hate to say it three times but it needs to be said, you’re moving to a second tier Hawaii so you should treat your time here as a rest and recovery phase of your life while generating large tax savings from investments and your business

Thank You and Conclusion

Would like to thank everyone for this community, it has been a wild ride and the Stars Aligned to be in this situation “Twas’ Written” (big thanks to BTB and fellow members of the DeFi team Iguana and Owl). For the record the main income source is not related to being a cartoon anon but, the returns made by being part of this community have tipped the scales to make this move

If you took nothing from this it would be easy to run this formula: 1) assume 10% taxes, 2) assume zero percent capital gains tax and 3) ask if you can live an island lifestyle for a minimum of 3-5 years. If you get to a big number, then it’s time to move as soon as possible. Based on where the world is heading, would doubt that this lasts forever since 0% tax on compounding of millions of dollars is a ton of lost tax revenue. With the 183 day rule, it’s best to ask questions now as you’d need to pull the trigger by the end of June 2022.

If you have questions I will answer under the BTB handle for the next couple of days or so! I was going to open this to free subs as well but if someone can’t afford the $0.27 a day to keep up to date on crypto, tech, e-com and macro all in one spot there is no chance they will make enough to eventually join the Citadel!

PS: big thanks for the editing and changing of writing style to match the standard format! Bullets are still the best communication method IMHO ; )

PSS: you can look all of this up online as well in terms of the legal stuff, it’s one of the only real tax havens for US natives without giving up citizenship

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Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions written by an anonymous group of Ex-Wall Street Tech Bankers who moved into affiliate marketing and e-commerce.

Daily Reminder: You ARE EARLY. Too much negativity/cope. Everyone reading this is extremely early. If you stay on top of technology, there is always a new opportunity