In recent times, tax breaks and a tropical island lifestyle seem to have lured bitcoiners to Puerto Rico. As the community expands, it draws more people from abroad and within the state. However, not everyone is pleased about this development.
The Perks of Cryptocurrency in Puerto Rico
The recognition into the crypto-vantage state in Puerto Rico went global in March 2021 with David Johnston. The 36-year-old Bitcoin entrepreneur and investor relocated his family and company to Puerto Rico with him. He claims it was a no-brainer for him to relocate from Austin.
Puerto Rico has a year-round tropical environment with lovely beaches. Furthermore, it has crypto-friendly laws. It offers significant tax incentives for individuals who spend at least 183 days on the island each year. Hence, Puerto Rico has taken the place of the Pacific Northwest as a new hot destination for crypto investors.
A Facebook whistleblower from San Francisco, Frances Haugen, said she invested in cryptocurrency “at the right time.” Then she relocated to Puerto Rico last year to be closer to her “crypto pals” on the island.
Logan Paul, a divisive YouTuber and NFT investor established his headquarters there. Brock Pierce, a child actor (of “Mighty Ducks” fame) turned 2020 independent presidential candidate, also set up shop in Puerto Rico.
The lure of the island for many is Act 60. The legislation gives significant tax reductions to qualifying citizens. In addition, a cryptocurrency and blockchain firm called Redwood City Ventures has set up shop in the American territory.
In the United States, investors pay up to 37% in short-term capital gains and 20% in long-term gains. This applies to cryptocurrencies and other assets held for more than a year. Some individuals under the Individual Investors Act 60 can pay zero taxes if they meet specific qualifications. This is especially good for entrepreneurs and traders of the cryptocurrency.
There are several tax benefits for business owners who decide to establish operations on the island. Companies based in the U.S. are subject to a 21% corporate income tax and a state tax, which varies. If a firm sells its services outside of Puerto Rico, to the United States, or anywhere else, it is charged a 4% corporate tax rate.
The Two Sides: Crypto Investors and the Locals
Over the past several years, much of the territory has had bad luck: earthquakes, hurricanes, a multi-year bankruptcy, and a worldwide pandemic. The government is breathing a sigh of relief as investors flood in at an unprecedented rate. The crypto community has established a system keeping it afloat and motivated.
Despite the booming economy, not all the residents are as thrilled. They are unhappy that they do not qualify for the capital gains tax exemption, which benefits non-Puerto Ricans.
There’s also a debate about whether the tax breaks achieve what the government intended. That includes, among other things, generating employment and putting more money into the local economy.