OREANDA-NEWS.  January 25, 2013. During 2012, Acts 22-2012 and 138-2012 were approved by the Legislative Assembly of Puerto Rico. The purpose of these measures is to provide incentives to individuals who have NOT been residents of Puerto Rico during the past 15 years, to become residents of Puerto Rico, reported the press-centre of ABLV.

In order to encourage the transfer of such individuals to Puerto Rico, the Acts completely exempt from Puerto Rico income tax their passive income, which may consist of interest, dividends, and capital gains.

What does the Act aim to do?
Act No. 22-2012 (also known as The Individual Investors Act) and its subsequent amendment seek to attract new residents to Puerto Rico by providing an exemption on certain investment income. The Puerto Rico government hopes that by establishing residence in Puerto Rico, new residents will positively impact the local economy by investing in real estate, buying local products/services, and transferring assets to local banks. This represents an additional initiative to attract foreign capital, fuel economic growth, and promote the socioeconomic development of the island.

To whom does the Act apply?
The Act applies to all individual investors who become 'Puerto Rico Residents' on or before December 31, 2035, provided that such individuals were not residents of PR at any time during the 15 year period preceding the effective date of the Act (i.e., January 17, 2012, even though it was subsequently amended in 2012).

Both US and non-US citizens may qualify under the Act. PR residents who are temporarily outside of PR (e.g., students or government officials working temporarily outside of Puerto Rico and other individuals with similar facts and circumstances) would not qualify.

What investment income is exempt?
Interest and dividend income received by Resident Individual Investors will be fully exempt from PR income taxation. The exemption applies to all sources of such income, i.e., PR, United States, and foreign. In the case of long-term capital gains, the Act provides for either a full PR income tax exemption or a reduced tax rate of 5%.

This article has been prepared by specialists of ABLV Corporate Services based on mass media publications. Specialists of ABLV Corporate Services provide legal and tax advise, including advise on international tax planning, establishment of holdings, trade, investment, and protection structures, purchase of real estate and other assets, as well as advise on change of residence and acquirement of residence permits. More detailed information on services provided by ABLV Corporate Services can be found at http://www.ablv.com/en/services/advisory