Puerto Rico as a Residence?

[denverd0n]

Originally Posted by SmartMove

Not this time it was approved, we were here for the election.

Did some looking into this, as I was curious. They did not exactly vote for statehood. What they did was have a non-binding referendum that asked two questions...
1. Should Puerto Rico's relationship with the United States change?
2. If PR's relationship with the US changes would you prefer a) statehood, b) independence, or c) sovereign free association?

On question 1, 54% were for change. On question 2, option a got 61%, option b got 5%, and option c got 33%.

When you do the math you see that less than 33% actually voted for changing to statehood. Of course, the supporters of statehood tried to spin this as a victory, claiming that most want change, and the change that is most wanted is statehood. On the other side, those opposed to statehood also claimed victory, pointing out that an overwhelming percentage wanted either no change, or a change to something other than statehood.

Who really won? It doesn't matter. It is still just a non-binding referendum. Before Puerto Rico can become a state the U.S. Congress has to vote to invite them to do so, and then the people of Puerto Rico will have to vote a direct "yes" or "no" on the question of becoming a state. None of this mixed voting stuff with multiple questions.

So, like I said, don't hold your breath.

[SmartMove]

After I posted that I started thinking that there was something else about the vote that I was forgetting so I also looking it up. You are right. Although it seemed like most if the people we talked to were in favor of statehood, but of course that was a really small sample.

[zboss]

You also need to weigh the protection of your assets under different state and territory codes vs. the little extra you gain from a reduction in taxes. Laws can be changed at any time and when tax laws are changed they are usually done to suit the needs of the taxing authority rather than the investor. You have to consider the big picture. For example, could PR make it difficult to repatriate the asset?

[pistarckle]

I have lived and worked in Puerto Rico , It is my understanding that by Federal law their " State " income tax must " mirror " the US law . Same in all U.S. Territories ,incorporated and unincorporated . You sometimes will mail your income tax money and forms to the U.S but the money is returned to the territories and commonwealths . The Federal Guv may not make a profit on commonwealth or territories . Same for all liquor taxes on V.I. and P.R. rums , money comes back . If they can not vote in federal elections then the feds can not keep the money . I believe that the original poster was referring to corporate taxes and duties , yes , P.R. did change them to attract investment . For 99 percent of things P.R. residents are treated as if you live on the mainland , or as we say , " the big island ".

[symystic]

Just wanted to add, when I was in PR it was very difficult to get anything done unless you were fluent in Spanish. Doesn't seen like a big deal till you are there. Lots of bias, attitude there. Beautiful place, I need to improve my Spanish.

[dohenyboy]

There is a tax exemption. PR residents pay social security tax but has its own system for taxation.. Its a great deal if you have portfolio income.

[Scottuk]

If you are a citizen of the US you MUST file a US tax return regardless of your residency. If you give up your citizenship the IRS can still bill you for 10 years beyond that if not more.

I speak as one who has not lived in the States for many years and still pay taxes to the US federal government on a yearly basis. This even though I pay at a higher rate of income tax than it would be if it was generated in the US. Now that is not fair and does not even mention double taxation.

[Sondor]

I just finished reading "Cruising the Caribbean: US Influence and Intervention in the Twentieth Century", by Ronald Fernandez and it's a fantastic book if you're at all interested in the politics (US mainly) of the region, and specifically in Puerto Rico (PR) over the last hundred years or so...

No affiliation with the Author, just a happy reader.

PR has some very unique federally approved situations which may favor some retirees. It's worth looking into for sure.

That said, PR doesn't have any federal representation, so we continue to commit taxation without representation and have for over 50 years.

Huh, wonder how I'd feel about that if I lived there ~

Some of the issues Fernandez illustrates is how until recently, the US hasn't said what it means if Puerto Rico votes for statehood. This issue goes back to the 1950's.

In the interim, the House has replied they can't answer that until it happens.

Finally, a few years back, a Senate sub-committee after research showing that PR would contribute the least amount of federal taxes, and would require the most in federal subsidies of any state currently on the books - ruled that should PR vote for statehood they could, but they would be limited in all social programs to a benefit of $10b per annum.

The controversy is that between the foodstamps (Bellyism) and federal college monies currently received, they already exceed $10b in US support each year, so why vote for statehood?

The whole thing is quite convoluted and the aforementioned book is highly recommended for anyone with an interest in the subject. I barely scratched the surface of the issues in this post.

Just don't read it if you want to feel good about how the US has handled Caribbean relations...Namely, PR and the DR. (the Author is fairly neutral, but the conclusions are obviously negative towards the US handling of PR and DR etc...)

[Dockhead]

You guys should take professional advice and don't just exchange speculation. A couple of things to keep in mind:

1. Just because PR is a territory of the U.S. doesn't mean, automatically, that residents of PR are taxed the same way as residents of other parts of the U.S. The U.S. tax law can perfectly well have special rules for PR (and it does). PR residents don't pay regular federal income taxes on PR source income (ironically, a U.S. citizen resident anywhere else does pay U.S. income taxes even on foreign source income). You do pay PR income tax on earned income, but there are zero taxes on dividends, interest, and capital gains.

2. Taxation of companies and taxes of people (natural persons) are different. Why would you have to set up a company to get tax breaks designed for people? In fact there are separate sets of (very cool) tax breaks for both companies and people.

3. Don't even think about trying to claim PR tax residency by using a mail drop box address. The IRS is more efficient than the old KGB and Mossad combined -- you will be very sorry. To be subject to PR tax laws, you have to be a bona fide resident, and you have to be able to prove it when asked (and you will be).

4. Get professional advice.


Taxation in Puerto Rico - Wikipedia, the free encyclopedia

http://www.gdb-pur.com/documents/201...-FactSheet.pdf

Puerto Rico Tax Incentives - Act 20 - Act 22 | Puerto Rico investments and tax opportunity for companies

[Dockhead]

Originally Posted by Scottuk

If you are a citizen of the US you MUST file a US tax return regardless of your residency. If you give up your citizenship the IRS can still bill you for 10 years beyond that if not more.

I speak as one who has not lived in the States for many years and still pay taxes to the US federal government on a yearly basis. This even though I pay at a higher rate of income tax than it would be if it was generated in the US. Now that is not fair and does not even mention double taxation.

Sorry, a lot of this is not true.

U.S. citizens do not automatically always have to file federal tax returns. In many cases if your income is below a certain level, for example. U.S. citizens who are residents of PR don't have to file a federal tax return if they have no non-PR source income.

As to double taxation -- the U.S. has double taxation treaties with most countries, so most U.S. citizens living abroad can at least deduct the foreign taxes they pay. If not, then you at least get the Foreign Earned Income Exclusion.

I do agree with you, however, that it is outrageous that the U.S. taxes non-resident citizens on worldwide income -- one of only a few countries to do that.

[Scottuk]

U.S. citizens do not automatically always have to file federal tax returns. In many cases if your income is below a certain level, for example.

Regardless you still have to file a return whether you owe or not.That has been my experience using an acounting firm that specialises in this field.

As to double taxation -- the U.S. has double taxation treaties with most countries, so most U.S. citizens living abroad can at least deduct the foreign taxes they pay. If not, then you at least get the Foreign Earned Income Exclusion.

This is true but over that amount you are still liable for tax hence the double taxation which combined is more than if the income was generated in the States.

I do agree with you, however, that it is outrageous that the U.S. taxes non-resident citizens on worldwide income -- one of only a few countries to do that.

I just happen to be a resident of a country that also does this though I am not a citizen so does not effect me.

[Rubikoop]

Originally Posted by Scottuk

If you are a citizen of the US you MUST file a US tax return regardless of your residency. If you give up your citizenship the IRS can still bill you for 10 years beyond that if not more. .

Uh, no... There are many thousands of us US citizens living in the US Virgin Islands and as residents we do not file taxes with the IRS. Everything is done locally. In fact I know of a recently retired federal employee that moved back to the continental US who found himself in a mess when trying to receive his pension checks. Because the USVI and IRS are not connected, the IRS didn't believe he had been paying taxes and refused to pay benefits until copies of old tax forms were provided to them. There are many tax breaks available here that aren't available in the states and I'm aware the same is true in PR.

[Hud3]

Lots of incorrect speculation and so-called "facts" based on experience elsewhere that simply do not apply to Puerto Rico, and are flat wrong. (Not you, Rubikoop. Some of those posting previously, like Scottuk.)

I can tell you that my niece and her husband recently moved to PR in order to take advantage of the federal and local income tax breaks being offered there. He runs a hedge fund, and will save a lot of money on his taxes. Sorry, I don't know the details of the tax laws there, but I do know that the tax breaks exist.

[Scottuk]

It appears that American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, and Puerto Rico residents are not liable for US federal tax. It likely about taxation w/o representation of US territories and possessions. Cheers for the heads up.

[svlamorocha]

Originally Posted by Scottuk

I speak as one who has not lived in the States for many years and still pay taxes to the US federal government on a yearly basis. This even though I pay at a higher rate of income tax than it would be if it was generated in the US. Now that is not fair and does not even mention double taxation.

If you are subject to double INCOME taxation by two COUNTRIES then do not blame Uncle Sam, get another accountant.

When you file a US return as a US resident or citizen you can claim "Foreign Tax Credit" for the foreign tax paid to a country with which there is no treaty. Been there, done that with a big 6 tax advisor. Of course, that requires special arrangement to make sure you pay the foreign tax before filing the US return, but that has been worked already.

If the foreign tax is higher than the US tax (as in UK's 50 per cent bracket; auch!) there is no double taxation, you just paid a higher tax and the US has nothing to do with the difference.

If the foreign tax is a tax on anything other than income (as in UK NI) or paid to anything other than a proper country (eg a province/state) then there is no credit, but that is not double taxation as defined.

All this is in addition to the Exclusion for some type and range of income and the Tax Treaties with certain countries, as mentioned by Dockhead.