Do you know that Puerto Rico has a capital gains tax? Puerto Rico is one of the few US jurisdictions that impose an income tax on non-residents who are doing business in Puerto Rico. Non-residents are subject to the same rates as residents for all other types of income, but not for capital gains. With so many people moving to Puerto Rico and looking to invest, this article will walk you through what you need to know about Puerto Rico capital gains tax if you’re a nonresident.
Capital gains are taxed at the same costs as other types of income, but not to Puerto Rico residents. Nonresidents who have business in Puerto Rico may be subject to taxation on their capital gains net investment income from Section 1411.
One thing you should know about this tax is that it has very specific requirements and qualifications before you’re able to qualify for its benefits. First off, your total net investment income should exceed $200,000 annually if married filing jointly or $125,000 if single filer; secondly, all distributions must be made after 2017 when the taxpayer’s broker made a Qualified Dividend Distribution (QDD) election; thirdly, there needs to be no more than 50% of your total income from Puerto Rico; and finally, any other type of investment income must not exceed $200,000 annually.
A QDD is a dividend distribution made on certain shares with the intent to comply with tax regulations under Section 1411. When this happens, taxpayers will be able to avoid taxation as if it were long-term capital gains. If you are in compliance with these requirements and would like more information about its benefits, consult your CPA or Tax Attorney for guidance.
Puerto Rico is one of the few islands in the world that can accommodate either tax residents and nonresidents on capital gains. Puerto Rican citizens are subject to a higher rate than non-resident taxpayers, which may seem unfair when considering both groups have been taxed on their income but not at the same rates. However, Puerto Ricans must be considered as receiving additional benefits from being a part of this nation, such as social security coverage or public services. Non-Residents who do business in Puerto Rico face an even more complicated set of rules for taxation because it’s possible they could become subject to taxes at different levels depending upon specific factors like if they’re married with dependents or single without children living back home.
Tax Benefits of Moving to Puerto Rico:
The Puerto Rico tax system is self-assessed and eliminates the complexity of complying with international taxation regulations.
US citizens are not required to file a federal income return if they reside in Puerto Rico for at least 183 days per year, but this does not exempt them from filing a Puerto Rican income tax return or from being subject to other taxes such as social security contributions that apply only to residents. A resident who spends more than 20% of their time outside of Puerto Rico will be classified by default as an expatriate and may need to take extra steps like registering themselves with the IRS before departing on any trips abroad so that they can continue taking advantage of benefits available exclusively through offshore banking institutions.
Puerto Rico imposes an income tax at graduated rates for all residents, including non-resident aliens doing business in Puerto Rico. Non-residents who derive their income solely from sources inside Puerto Rico are not subject to Puerto Rican Income Taxation.
