Will Moving to Puerto Rico Avoid All Cryptocurrency Taxes?
No, Puerto Rico is not a tax-free crypto haven. If you Googled Puerto Rico Crypto Haven, you will no doubt find images of wealthy hipsters living the highlife on the Puerto Rico coast – sipping espresso, lounging by the pool, and driving fast cars on the false pretext that all of their crypto incomes are made are tax free. That’s not the case. Recently, financial bloggers (or self-proclaimed journalists), tax attorneys, and other practitioners have blown U.S. taxpayers with a bogus list of goods – that just moving to Puerto Rico (instead of formal expatriation) can avoid U.S. taxes on cryptocurrency profits. In other words, by simply moving to Puerto Rico, US residents can avoid all cryptocurrency taxes. There is no pot of gold at the end of the rainbow for taxpayers who follow this strategy. Indeed it can be very dangerous for taxpayers who too quickly seize the supposed opportunity to avoid all taxes on the sale of cryptocurrencies – only to find out that they are actually subject to taxes on the income currently generated in cryptocurrency (capital gains, dividends from ETFs, exchanges, etc.) for crypto owned – or considered to be U.S. native – when they moved to Puerto Rico – even if approved under Incentives Code (Act) 60 (formerly Acts 20/22). Although Act 60 can be very complicated, let’s go over five basic facts before moving to Puerto Rico because of the cryptocurrency tax.
Moving with current crypto ownership
If a taxpayer already owns cryptocurrency (or other assets) and relocated Puerto Rico to sell the cryptocurrency – they will be taxed by the IRS on the profits generated from those cryptocurrency sales / exchanges. In other words, a taxpayer who already owns cryptocurrency (or other assets) cannot simply move to Puerto Rico and sell or swap the assets to avoid US tax on the sale of those assets. So, if a person has already made a ton of money from crypto while living in the US mainland, moving to Puerto Rico at this point would not remove tax liability on profits from the sale of crypto.
Residency specific to Puerto Rico
Well, for taxpayers who know that at some point in the future they want to acquire new cryptocurrencies and commit murder and put themselves in a tax position, Puerto Rico could be an option. Of course, it’s not that easy to just pack your bags and get on a plane. The taxpayer has to jump through many hoops. The first is to become a PR resident. To be a Puerto Rico tax resident there is very much Specific requirements must meet the taxpayer. Additionally, there are many pitfalls to consider and when the taxpayer does not plan properly (e.g. Rico.
Under the revised version of Public Relations Act 60, taxpayers are required to make greater contributions to the Puerto Rico economy than they were before – and now must also purchase property in Puerto Rico to qualify under Act 60, not as easily as temporarily staying in Puerto Rico to qualify. And as the crowd goes to Puerto Rico, so too are home prices.
Incentive code 60 is not set in stone
While Law 60 indicates that Puerto Rico intends to maintain this facility for taxpayers planning to relocate to Puerto Rico by at least 2035/2036, it is not an absolute right. In other words, the Puerto Rico government can still change or cancel the program even after a taxpayer qualifies. Additionally, the U.S. government has also targeted Act 60, and hardworking Puerto Rico residents don’t particularly like it either (as they can’t benefit from it directly).
Cryptocurrency / assets acquired later are the advantage
Assuming a taxpayer is qualified under Act 60, the benefit becomes to acquire cryptocurrency and other assets once it is there. The assets acquired after moving to Puerto Rico where the taxpayer qualifies as a Puerto Rican resident – along with qualifying under Act 60 – can be sold at a later date without paying U.S. tax, however there are reservations to be noted. Any income deemed to be obtained in the United States or otherwise outside of Puerto Rico would continue to be considered taxable by the United States – and there is no telling whether Act 60 will remain in its current state. This is a current loophole that many politicians are aware of and that they are trying to remove the tax benefits of Law 60 for US persons.