It is their only source of capital gains in the country.
Puerto rico capital gains tax rate.
In arriving at effective capital gains tax rates the global property guide makes the following assumptions.
As mentioned puerto rico residents who earned income from sources outside puerto rico are subject to taxes on that portion of their income.
To qualify you must be a bona fide resident of puerto rico for an entire tax year.
There is no tax on dividends and no capital gain tax in puerto rico.
Puerto rican non resident us citizens are only subject to a flat withholding rate.
However some big.
Puerto rico can be a haven for entrepreneurs.
However individual investors with an act 22 decree are exempt from paying taxes on dividends and capital gains which could otherwise be as high as 20 for long term and 37 for short term capital gains.
For instance if you decided to move to puerto rico in october of 2020 you would not qualify for the 0 capital gains tax in 2021 because you did not spend at least 183 days in puerto rico in 2020.
They have owned it for 10 years.
Personal income tax rates.
Puerto rico collects a state income tax at a maximum marginal tax rate of spread across tax brackets.
Unlike the federal income tax puerto rico s state income tax does not provide couples filing jointly with expanded income tax brackets.
Puerto rico act 60 0 tax on capital gains and distributions.
The property is directly and jointly owned by husband and wife.
Long term capital gains are subject to a special tax rate of 15.
5 tax on long term capital gains realized before becoming a resident of puerto rico but recognized after 10 years of becoming a resident of puerto rico as long as recognized before january 1 2036 this 5 long term capital gain tax only applies to the portion of gain that relates to the appreciation of the property while the individual lived.
However this part of puerto rico act 60 applies only to puerto rico sourced capital gains and passive income.
You can learn more about how the puerto rico income tax compares.
Income from personal services performed within puerto rico will not be considered from puerto rican sources if it is usd 3 000 or less and the individual was present in puerto rico for 90 days or less during the calendar year.
Instead the 2021 tax year would be the first full tax year for which you could claim residence in puerto rico qualifying you for the exemption in.
The island offers a corporate tax rate in the single digits and capital gains taxes at zero.
In the case of long term capital gains puerto rican non resident foreign nationals are subject to a flat withholding rate of 25.
Short term capital gains are subject to the regular gradual rates.
The following regular tax rates remain in effect for 2018 and future years.
Legally avoiding the 37 federal rate and the 13 3 california or other state rate sounds pretty good.
Capital gains taxes.
