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PALMAS

DEL MAR
THE INDIVIDUAL INVESTORS ACT

OFFERING ATTRACTIVE TAX INCENTIVES FOR INDIVIDUALS RELOCATING TO PUERTO RICO

The Individual Investors Act (Act 22) seeks to • All capital gains accrued and unrealized prior to REQUIREMENT FOR NEW RESIDENTS
attract new residents to Puerto Rico by providing becoming a new resident will be subject to a tax: THAT HAVE NOT LIVED IN PUERTO
a total exemption from Puerto Rico income taxes (i) at the prevailing tax rate (currently 10%), if RICO FOR THE LAST 15 YEARS:
on all passive income realized or accrued after such gain is recognized within 10 years of new • Physical presence in Puerto Rico for a period of 183
such individuals become bona fide residents of residence in Puerto Rico, and days during the taxable year will create a presump-
Puerto Rico.
(ii) 5%, if such gain is recognized after said tion of residence in Puerto Rico for tax purposes
10-year period. Such taxes paid may be used as • Section 937 of the U.S. Internal Revenue Service
TAX TREATMENT a credit in another jurisdiction that taxes such Code provides additional guidance as to what is
Tax exemptions conferred under Act 22 are valid gains. The U.S. will not tax any prior unrealized generally considered a bona fide resident: (a) no
through December 31, 2035: gains if recognized after 10 years of residence tax home outside Puerto Rico during the tax year,
in Puerto Rico and (b) no closer connection to the U.S. or a
Passive Income Exemptions: foreign country.

• New residents will enjoy a 100% tax exemption
from Puerto Rico income taxes on all dividend and
interest income

• Interest and dividends that qualify as Puerto
Rico source income will not be subject to federal
income taxation under Section 933 of the IRS Tax
Code.
• New resident investors may be able to reduce the
tax rate applied on interest and dividend income
coming from sources outside of Puerto Rico
(including the source country taxation) to 0% or
10%, respectively, by investing through certain
Puerto Rico investment vehicles

Capital Gain Exemptions:

• All capital gains accrued after becoming a
new resident will be 100% exempt from Puerto
Rico taxes. These gains will not be subject to
federal taxes.

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