It is no secret that technology has overtaken a big part of our daily lives. We depend on it for everything from waking up, to conducting business meetings with people from all across the world. Therefore, it is no surprise that there is a new form of currency that is transforming the traditional way that we conduct business transactions, and the market for it just seems to keep growing. The cryptocurrency era has begun, and investors from all around the globe are wasting no time to get in on the action with Puerto Rico’s tax benefits in their sights.
Given that the cryptocurrency market is projected to rise to the billions of dollars in a couple of years ($7.5 billion by 2024, according to a report by Grand View Research, Inc.), it is no surprise that a significant number of individual investors and companies have started to shift their attention -and their wallets- to this emerging industry.
However, one very important aspect that every investor must keep in mind while performing transactions, in this or any other industry, is their tax liability. As a general rule of thumb, an investor must bear in mind that the higher the capital gains earned from these transactions, the higher the taxes owed. Therefore, an investor must always analyze what are the actual gains that will be received as a result of this type of transactions after all of the corresponding taxes are paid to the government, which in some cases could reach millions of dollars.
Provided that the current tax rate for capital gains in the U.S. is set between 15% to 20% depending on the person’s tax bracket, careful tax planning is a must for anybody that is considering a substantial transaction and wants to lower their tax liabilities or eliminate them completely.
Fortunately, Puerto Rico currently provides an effective alternative for those investors that want to make the most out of their investments with minimal to no tax liability. Specifically, those investors that take advantage of the provisions set forth in Act 20 and Act 22, could be able to keep 100% of their capital gains without having to pay any taxes whatsoever and without renouncing to their U.S. citizenship. Hence the reason why so many investors have decided to move to Puerto Rico and establish their businesses here, including investors from the Bitcoin, Blockchain and cryptocurrency industry in general.
Given the possibilities that this industry, along with Puerto Rico’s tax exemption policies, represent for the island’s economic development, the Puerto Rico government has decided to create the legal framework to help this industry grow and develop into one of the main revenue streams the island has to offer. With this in mind, the Department of Economic Development and Commerce of Puerto Rico (“DDEC”) has created an Advisory Council for the Development of Businesses based on blockchain technology. Although the Advisory Council’s creation is very recent (the first meeting was held in March 2018), it successfully established a work plan for the creation of standard procedures for evaluating projects and initiatives proposals. According to Manuel Laboy, Secretary of the DDEC, the main focus of the Advisory Council is to provide recommendations so the policies and regulations developed by the government are competitive and consistent with similar frameworks at the international level.
So for all of those contemplating investing in blockchain technology and cryptocurrency with minimal to no tax liabilities, the Puerto Rico tax incentives provided by Act 20 and Act 22 just might be the perfect choice.