Tax Shelters Puerto Rico

1
Puerto Rico The Newest Tax Shelter for Wealthy
Investors

• The Capital Press

2
Changes in Puerto Rico

• When people think of Puerto Rico, wealth isnt
  usually the first thing that comes to mind.
• According to Fortune Magazine, 45 of Puerto
  Ricos population lives below the poverty line
  and unemployment has soared to 15.
• But lawmakers on the island are hoping to change
  that.

3
Acts 20 and 22

• Two initiatives passed in 2012Acts 20 and
  22that are meant to attract wealthy individuals
  and companies to their shores.
• Act 20, otherwise known as the Export Services
  Act, exempts businesses that have moved to Puerto
  Rico from taxes on dividends and profit
  distributions. On top of that, it caps earnings
  tax for these companies at 4.
• Act 22, the Individual Investors Act, waves takes
  on dividends, interests, and capital gains for
  new residents.

4
Legislation Gaining Steam

• its working. We are receiving a lot of
  entrepreneurs who are partnering with our people,
  creating jobs, and we are really happy with the
  program.
• Puerto Ricos Secretary of Economic Development,
  Alberto Baco (Bloomberg)
• This year, the Puerto Rican government expects to
  receive 250 more applications from interested
  individuals.
• Puerto Ricos highest profile investor so far is
  American hedge fund manager and billionaire, John
  Paulson.
• According to Bloomberg, Paulson has been
  snatching up real estate on the Island and
  purchased over 100 million of the commonwealths
  municipal debt.

5
Too Good to be True?

• On the surface, the new laws seem ideal
• by creating legal tax shelters on the island, the
  Puerto Rican government should be able to
  incentivize job creation and add a huge boost to
  the islands economy.
• But some experts warn that moving ones business
  to Puerto Rico could poses significant risks.
• A tax attorney based in Dallas, Joe Garza, said
  in a recent press release that Puerto Ricos
  ambitious initiatives may not be so reliable.
  Theres no guarantee that Acts 20 and 22 will
  remain untouched, he warned. Congress has
  already set a precedent for quashing the islands
  ambitious tax policies back in 2006.

6
Concerns for New Residents

• In addition to the financial uncertainty,
  residents of Puerto Rico face serious risks to
  their safety.
• Currently, the island is a major center for drug
  trafficking.
• Coupled with the extreme poverty rate, that has
  caused the murder rate in Puerto Rico to soar.
• Under Act 22, individuals must spend at least 183
  days of the year on Puerto Rico to be considered
  a resident.
• While safety remains a serious issue, new
  residents seem more concerned with overall
  quality of life on the island.
• In anticipation of the influx of investors, John
  Paulson has plans to develop high-end real estate
  for the new population.

7
A Final Warning

• Garza warns that it will take time before Puerto
  Rico becomes the island paradise that people like
  Paulson anticipate. Investors should
  understand that the island may not protect their
  safety as well as it does their assets, he said.