The St. Regis Bahia Beach Resort, Puerto Rico is set on a 483-acre nature preserve with a golf course and beachfront residences, set against turquoise waters and lush rainforest. But perhaps most alluring to those who immediately flock to the property is a section on its website that explains tax credits for island residents.
That was the case for Anthony Emtman, who left Los Angeles in March to buy a vacation apartment. The CEO of Ikigai Asset Management is now part of the growing cryptocurrency community on Puerto Rico's northern coast, where the tropical climate is just an added bonus.
Emtman and his cryptocurrency peers are taking a page from hedge funds looking for an island home to reap huge tax savings. High-income investors in the US pay up to 20% in capital gains taxes and up to 37% on short-term deals - long-term gains. They pay nothing in Puerto Rico. Companies headquartered in the continental United States pay 21 percent federal corporate and state taxes, compared with 4 percent on the islands. That made some investors think the move was obvious, especially as the cryptocurrency market continues to rise rapidly and Democrats demand higher taxes on the wealthy.
The presence of digital currency enthusiasts is already being felt on this small island, where chance encounters and social opportunities abound: clashes at the taco stand. Spontaneous drinks and dinner in a luxury apartment. “Crypto Monday” held parties at hotels and restaurants across San Juan.
Crypto funds Pantera Capital and Redwood City Ventures, among others, have set up offices on the island. Facebook product manager-turned-whistleblower Francis Haugen recently told The New York Times that she lives in Puerto Rico in part to be with her “cryptocurrency friends.” New York City Mayor-elect Eric Adams flew there in November with crypto billionaire Brock Pierce for dinner with Puerto Rico Governor Pedro Pierluigi.
Now, “it’s not just about moving to Puerto Rico to save on taxes,” said Giovanni Mendez, a corporate and tax attorney who advises relocators. "It was, 'Move to Puerto Rico because everyone's there.'
The Puerto Rican government established the tax credit in 2012, hoping to inject money into the island's struggling economy and diversify its employment opportunities. Hedge funds have gradually begun to seek a foothold on the island, but what really accelerated the wave of newcomers was the pandemic — which drove people away from big cities and popularized telecommuting — and the recent boom in the crypto market.
Proponents of the tax break have described it not only as a boost to the island that has been mired in bankruptcy for more than four years -- beset by hurricanes, earthquakes, political scandals and a pandemic -- but as an opportunity to reinvent. However, there are detractors to the idea: Some laws only apply to new residents, so lifelong islanders don't qualify. Some are reluctant to welcome new groups of wealthy residents, fearing that the influx of income will exacerbate inequality and create social tensions. Real estate prices have now reached "ridiculous" levels.
During the last big cryptocurrency boom in 2017, many investors tried to move to Puerto Rico before the market peaked and then crashed, Mendes said. So far this year, Puerto Rico has received more than 1,200 applications—a record number—under the Individual Investors Act, which exempts new residents from paying capital gains taxes, according to the Puerto Rico Department of Economic Development and Trade. The number of mainland Americans claiming tax credits in Puerto Rico has tripled this year.
Another 274 corporations, LLCs, partnerships and other entities have been approved under the Export Services Act, which provides for a 4% corporate tax rate and a 100% dividend exemption. Both fall under Puerto Rico’s Bill 60, a set of tax breaks consolidated in 2019 to attract investment not only from the crypto industry, but also from finance, technology, and more.
The island even kicked off its first blockchain week in Puerto Rico on Dec. 6. On the first day of the conference, Puerto Rico House Speaker Rafael “Tatito” Hernandez announced that the legislature will consider using blockchain technology to reduce government corruption.
Eventually, “Puerto Rico will be recognized as the blockchain capital,” said BitAngels founder Michael Terpin, who moved to the island in 2016 from Las Vegas. He said he was known in crypto circles as the "savior" of Mission Island. Tax breaks and new business communities.
Paradise life
The cryptocurrency crowd is mainly concentrated in three coastal areas.
There are secluded resorts like Bahia, 26 miles east of San Juan, and the Ritz-Carlton-branded Dorado Beach Resort, about 23 miles west of the capital. Those looking for a more urban lifestyle opt for Condado, San Juan's upscale business district where residential and hotel skyscrapers line the ocean.
“There are restaurants, cafes and shopping centers,” said Brent Johnson, chief executive of wealth management firm Santiago Capital, who moved to Condado from San Francisco in May. "It's kind of like a mini Miami."
While in Puerto Rico, Johnson was able to network with wealth management, private equity and cryptocurrency firms, as well as those in real estate, pharmaceuticals, energy and agriculture.
“I feel like I can come here and do my job and still be connected to the financial world, which is a lot better than going to Hawaii or somewhere in Mexico,” he said.
As for living in Bahia, "it's like living in a rainforest," says Ikigai's Emtman. Beyond this rainforest, you can play tennis, basketball, golf, lift weights in the gym or go kayaking. When the sun goes down, exercise turns into drinking.
"The friendly nature of people, their friendliness and their openness means you end up going to someone's house for dinner or a few drinks," he said.
That’s what happened to Brent James, a cryptocurrency investor who moved from Atlanta to Puerto Rico in 2018.
About two months ago, he was eating tacos with a friend in Condado when he spotted Johnson riding his bike. James recognized Johnson through his popular Twitter account.
"I called his name, he came over, we started talking and became friends," James said. Johnson invited him to a small meeting where new projects and business opportunities were discussed.
"The island is hungry for knowledge and opportunity," James said.
real estate boom
The influx of new immigrants is making waves in the real estate market, especially in tourist communities.
According to Priscilla Ferrer, a broker and appraiser from Puerto Rico, the Dorado saw the biggest jump, nearly tripling in price.
"It's ridiculous," he said. "These mansions are bought at emotional prices rather than economic prices."
Francisco Diaz Fournier, co-founder of Luxury Collection Real Estate, said properties selling for more than $20 million are now common.
“Right now, we have one house in Dorado Beach for $27 million and another for $29 million,” he said.
Prices per square meter have nearly doubled in Bahia, according to Blanca Lopez, founder of Gramercy Real Estate Group and daughter-in-law of Governor Pierluisi.
“We’re seeing prices above $3,000 a square foot,” he said, while high-end residential values in Condado are around $1,400 to $1,500 a square foot, up about 35 percent from last year.
And there isn't enough inventory to meet demand as buyers arrive on the island faster than mansions can be built.
"We don't have space, at least not in Dorado, Bahia or Condado," Diaz Fournier said. "The market is expanding, so we're seeing leaks in areas that people in San Juan haven't noticed before."
Raul Santiago-Bartolomey, an assistant professor of planning at the University of Puerto Rico, said that as wealthy people become more popular elsewhere, it hurts housing and job prospects for islanders.
"It makes it more difficult for the workforce and low-income families who really need to live near these high-opportunity areas to access them," he said.
Condado is building several new apartment buildings, but not enough to keep pace. Even manpower is scarce, so Puerto Rico is working with the U.S. State Department on visas to bring "people from the Dominican Republic, Mexico, Haiti and South America to Puerto Rico because we don't have anyone to build," Diaz Fournier said.
For him, newcomers are welcome, as more than 500,000 residents have left the island in the past two decades.
"It's really exciting," he said. "This is Puerto Rico at its best."
“One Puerto Rico”
So far, the incentive appears to be job creation.
Between 2015 and 2019, the Individual Investor Act added about 4,400 jobs, and the Export Services Act added 36,222, according to a study by Puerto Rican consulting firm Estudios Tecnicos. Call centers accounted for the most jobs, followed by consulting, advertising and public relations, and tax and accounting services.
Carlos Fontan, Director of Incentives at the Ministry of Economic Development and Trade, said that as long as jobs are created, “the door will be open” for the crypto community.
Alberto Baco-Bague, a former department secretary and Bill 60 promoter, said the tax credit is doing what it was designed to do.
In 2017, he founded the Partnership for Modern Puerto Rico, an economic development think tank that connects local business leaders with incoming Act 60 members. According to Baco-Bague, assets under management exceed $50 billion.
"Ideally, we would like to have a Puerto Rico," he said. "Not one new resident of Puerto Rico, the other is a local business leader."
One of the biggest challenges, however, is convincing local residents of the economic benefits of the plan. The Individual Investor Act, also known as Bill 22, applies only to non-Puerto Ricans, meaning Islanders are not eligible. While the Export Services Act applies to residents, many don't think so because tax credits are often advertised alongside programs for foreigners.
“There are certainly calls in Puerto Rico for a fairer tax system,” said Caroline Lopez, a tax attorney who has worked on the incentive since 2011. All these taxes and a lot of people are under Act 22 no?
During a visit to San Juan this month, Nobel Prize-winning economist Joseph Stiglitz said tax breaks are not an effective tool for economic growth.
"Bill 22 will have little impact on Puerto Rico's economy," he said at a conference organized by the Center for New Economics. "They spend very little, but very little, and it drives up property prices and the cost of living for other people. It's what economists call a negative externality.
Puerto Rico isn’t the first country to try to attract cryptocurrency investment, and it certainly won’t be the last. The economy of El Zonte, a surf town on El Salvador's Pacific coast, is powered by bitcoin. President Nayib Bukele of El Salvador has been a supporter of cryptocurrencies long before he took office in 2019. This year, the country adopted bitcoin as its national currency and announced plans for its first bitcoin government bonds and a tax-free bitcoin city. Portugal also does not tax the purchase or sale of cryptocurrencies unless it is a person’s main source of income.
Puerto Rican cryptocurrency entrepreneur Juan Carlos Pendreira said the growing interest in cryptocurrencies, especially among young islanders, is a rare opportunity.
If not taken seriously, "we will miss the opportunity to rediscover the island".
—With help from Jim Wyss.
This article was provided by Bloomberg News.
FAQs
Why do crypto people go to Puerto Rico? ›
Dozens of entrepreneurs, made newly wealthy by virtual currencies, moved to the island to avoid taxes and to build a society that runs on blockchain. The main reason crypto entrepreneurs are flocking to Puerto Rico lies in laws passed by Puerto Rican legislators in 2012.
Where do crypto millionaires live? ›Bitcoin millionaires are moving to Puerto Rico for lower taxes and island living.
Is Puerto Rico a tax haven for crypto? ›For bona fide residents of Puerto Rico, crypto is not subject to tax, and Puerto Rico corporations are subject to just a 4% federal income tax.
Can you avoid federal taxes by moving to Puerto Rico? ›Therefore, if an individual relocates to Puerto Rico, the move does not result in an expatriation tax. Further, U.S. citizens and resident aliens living in Puerto Rico are generally subject to U.S. tax on worldwide income.
Why does the US want to keep Puerto Rico? ›The strategic value of Puerto Rico for the United States at the end of the nineteenth century centered in economic and military interests. The island's value to US policy makers was as an outlet for excess manufactured goods, as well as a key naval station in the Caribbean. US Navy Captain Alfred T.
What is the benefit of Puerto Rico being a US territory? ›Residents of the island are exempt from most federal taxes, including income tax, excise tax, and estate and gift taxes. They do pay federal payroll taxes and help fund Medicare and Social Security. Puerto Ricans contribute more than $4 billion annually in federal taxes to the United States.
Where do rich Americans live in Puerto Rico? ›Dorado: Accessible, Upscale, and Safe
If an upscale, livable, walkable area is what you desire in Puerto Rico, Dorado is a great choice. Dorado is one of the wealthiest areas near San Juan, with gated communities everywhere you look.
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income taxes (although New Hampshire and Tennessee tax interest and dividends while Washington taxes capital gains). Where should I move to avoid crypto tax?
Who is the richest crypto millionaire? ›- Changpeng Zhao (CZ)
- Song Chi-hyung.
- Brian Armstrong.
- Jed McCaleb.
- Chris Larsen.
- Tyler and Cameron Winklevoss.
- Michael Saylor.
- Wealthiest Crypto Holder FAQs.
Texas. Like Wyoming, Texas allowed for chartered banks to custody digital assets in June 2021, which was viewed at the time as a way to tap into the state's booming domestic crypto market. Coinciding with its cheap electricity — beneficial to crypto mining activity two years ago — the state also features no income tax.
How do I legally avoid crypto taxes? ›
- Buy Items on Crypto Emporium.
- Invest Using an IRA.
- Have a Long-Term Investment Horizon.
- Gift Crypto to Family Members.
- Relocate to a Different Country.
- Donate Crypto to Charity.
- Offset Gains with Appropriate Losses.
- Sell Crypto During Low-Income Periods.
Switzerland is a famous tax haven, and crypto is no exception. Any crypto income or capital gains earned for individual investors are considered completely tax free. For this reason Switzerland has become known as the “crypto valley,” a hub for crypto companies and investors.
Why do Americans not pay taxes in Puerto Rico? ›Puerto Rico is an unincorporated territory of the United States and Puerto Ricans are U.S. citizens; however, Puerto Rico is not a U.S. state, but a U.S. insular area. Consequently, while all Puerto Rico residents pay federal taxes, many residents are not required to pay federal income taxes.
How long can a U.S. citizen stay in Puerto Rico? ›An approved ESTA for Puerto Rico allows a stay of 90 days with each entry for tourism, transit, or business purposes, and is valid for a total of 2 years from issue, meaning there is no need to re-apply for every trip to US territories.
Is buying a house in Puerto Rico a good investment? ›Buying real estate in Puerto Rico offers a number of logical investment perks for Americans, including flexible finance possibilities, zero immigration concerns, and amazing tax breaks (should you qualify).
Does going to Puerto Rico count as leaving the US? ›Puerto Rico is a United States territory. If you're visiting from any part of the U.S., you don't have to exchange your currency, update your cell phone plan for international service, or go through customs or immigration. An unforgettable Caribbean getaway is within easy reach — no passport required.
Are Puerto Ricans US citizens? ›According to U.S. law, Puerto Ricans remain American citizens. Those who are born in Puerto Rico receive U.S. citizenship.
Why don t we let Puerto Rico become a state? ›According to Christina D. Ponsa-Kraus, professor of legal history at Columbia Law School, some American legislators feared that racial mixing would occur among white Americans in the contiguous United States and non-white Puerto Ricans if Puerto Rico were admitted as a state.
What would happen if Puerto Rico became independent? ›Puerto Rico would become a sovereign nation with its own political system, language, culture, and membership in the United Nations. The United States would no longer be obligated to provide financial support, but would lose all military bases unless Puerto Rico agreed to lease them.
What would happen if Puerto Rico became a state? ›Benefits of statehood include an additional $10 billion per year in federal funds, the right to vote in presidential elections, higher Social Security and Medicare benefits, and a right for its government agencies and municipalities to file for bankruptcy.
What are the 7 US territories? ›
- American Samoa.
- Commonwealth of the Northern Mariana Islands.
- Federated States of Micronesia.
- Guam.
- Republic of the Marshall Islands.
- Republic of Palau.
Remember this rule of thumb: depending on where you settle on this U.S. territory, you will likely save somewhere between 5% and 70% off the cost of living found in a typical city in the United States. Puerto Rico's smaller cities tend to have an especially low cost of living.
What is the poorest town in Puerto Rico? ›Adjuntas, Puerto Rico has the lowest median household income of any county or county-equivalent in the United States. Per capita income ranges from $24,264 in Guaynabo to $5,943 in Maricao.
What is the safest place for crypto? ›Arguably, the safest way to store crypto is a hardware wallet. But as Marie explains, the effectiveness of cold storage depends on its careful use. “Hardware wallets are physical devices that securely store the private keys to your cryptocurrency addresses offline.
Where is the best place to live with crypto? ›Portugal is one of the best places in the world to live if you want to avoid paying crypto taxes. Since 2018, all proceeds from selling crypto are tax free. In even better news, crypto trading isn't considered investment income either, so crypto trading is also tax free.
Where is the safest place to keep crypto? ›Users can lose bitcoin and other cryptocurrency tokens due to theft, computer failure, loss of access keys, and more. Cold storage (or offline wallets) is one of the safest methods for holding bitcoin, as these wallets are not accessible via the internet, but hot wallets are still convenient for some users.
Who is the crypto billionaire that went broke? ›In less than a week, the cryptocurrency billionaire Sam Bankman-Fried went from industry leader to industry villain, lost most of his fortune, saw his $32 billion company plunge into bankruptcy and became the target of investigations by the Securities and Exchange Commission and the Justice Department.
What crypto do billionaires buy? ›As might be expected, Bitcoin (BTC -0.62%) is a favorite choice of billionaires looking to extend their wealth into new asset classes such as crypto. Lately, Ethereum (ETH -0.61%) has been attracting its own share of billionaire supporters. And don't forget about meme coins.
Which crypto billionaire lost everything? ›Binance founder and CEO Changpeng Zhao (commonly known as CZ) was the crypto billionaire who lost the most money following the crypto crisis of 2022, with a net worth drop amounting to 82 billion U.S. dollars.
Can you get caught not paying taxes on crypto? ›
If you don't report taxable crypto activity and face an IRS audit, you may incur interest, penalties, or even criminal charges. It may be considered tax evasion or fraud, said David Canedo, a Milwaukee-based CPA and tax specialist product manager at Accointing, a crypto tracking and tax reporting tool.
Is crypto taxed if never sold? ›If you only bought but didn't sell crypto during the year, electing to hold it in a wallet or on a crypto platform, you won't owe any taxes on the purchase. Much like you wouldn't owe taxes for buying and holding stocks for your portfolio.
Do Americans have to pay taxes on crypto? ›The IRS classifies cryptocurrency as property or a digital asset. Any time you sell or exchange crypto, it's a taxable event. This includes using crypto used to pay for goods or services. In most cases, the IRS taxes cryptocurrencies as an asset and subjects them to long-term or short-term capital gains taxes.
How do you cash out millions in crypto? ›To cash out Bitcoin, you'll first sell it using your preferred crypto exchange, a payment platform, or Bitcoin ATM. From there, you'll withdraw funds to your bank account. Keep reading to learn more about cashing out bitcoin to your bank account, with examples for some of the most popular crypto exchanges today.
What happens if you don't report crypto in taxes? ›Taxpayers are required to report all cryptocurrency transactions, including buying, selling, and trading, on their tax returns. Failure to report these transactions can result in penalties and interest.
Does crypto need to be reported to IRS? ›You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.
How do I cash out crypto without paying taxes USA? ›Instead of cashing out your cryptocurrency, consider taking out a cryptocurrency loan. In general, loans are considered tax-free. If you need liquidity immediately, you should consider using your cryptocurrency as collateral to take a loan through a decentralized protocol.
Does Puerto Rico support cryptocurrency? ›Yes, Bitcoin (BTC) can be purchased in Puerto Rico. Most mainstream cryptocurrency exchanges list BTC, including Gemini, Coinbase and Binance.
What is the crypto incentive in Puerto Rico? ›Puerto Rico Expands 4% Tax Incentive to Crypto and Blockchain Activities | Video | CoinDesk.
Is Puerto Rico a tax haven for US citizens? ›Puerto Rico residents generally do not pay federal income taxes, but they do pay taxes to the Puerto Rico government. And Puerto Rico keeps those taxes low for certain businesses and individuals. Under the Act 60 Export Services Tax Incentive, a qualified business enjoys a corporate tax rate of only 4%.
What crypto billionaires are dead in Puerto Rico? ›
Nikolai Mushegian was found dead near Condado Beach in San Juan, Puerto Rico. It was reported by a local news outlet, El Nuevo Dia, that beach patrol retrieved the 29-year-old's body from the ocean on Oct.
Which US state is crypto friendly? ›Like Wyoming and Florida, cryptocurrency businesses in New Hampshire are exempt from the state's money transmission regulations. New Hampshire's only state income tax is on interest and dividends – capital gains are not taxed.
Who is the wealthiest Puerto Rican? ›Puerto Rican residents are taxed in Puerto Rico on their worldwide income, no matter where the income is sourced. Puerto Rican non-residents are only taxed in Puerto Rico on their Puerto Rico-source income. Income for services performed is sourced to Puerto Rico based on where the services are performed.
What is the maximum Christmas bonus in Puerto Rico? ›Christmas Bonus Rates and Requirements. Employers with up to 15 employees have to pay their qualified employees a bonus equal to 3.00% of the employee's earned wages during the qualifying period, up to $10,000 of wages (maximum bonus $300).
How do you beat crypto taxes? ›short-term capital gains. There's one easy and effective way to reduce your taxes liability: lock in long-term capital gains rates by simply holding your crypto-assets for over a year. As discussed earlier, long-term capital gains offer significantly lower tax rates when compared to short-term gains.
Who pays crypto tax? ›The IRS treats all cryptocurrencies as capital assets, and that means you owe capital gains taxes when they're sold at a profit. This is exactly what happens when you sell more traditional securities, like stocks or funds, for a gain.
How do I avoid taxes in Puerto Rico? ›Individuals who are bona fide residents of Puerto Rico are eligible for a possession-source income exclusion, and therefore not subject to U.S. income tax on work or business income sourced from within the territory.
Does Puerto Rico receive Social Security? ›Many federal laws, Kavanaugh noted, treat the territories differently from the states — and not always to the detriment of the territories' residents. For instance, Puerto Rico residents are exempt from federal income tax, though they do pay other federal taxes such as Social Security, Medicare, and unemployment taxes.
Does the IRS consider Puerto Rico a foreign country? ›For foreign tax credit purposes, all qualified taxes paid to U.S. possessions are considered foreign taxes. For this purpose, U.S. possessions include Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands and American Samoa.
Who are the three crypto owners dead? ›
Claim the JACKPOT with 55 FREE SPINS. Signup today to redeem your bonus. Nikolai Mushegian, age 29, Tiantian Kullander, 30, and Vyacheslav Taran, age 53, were three outstanding crypto luminaries who passed away within a matter of weeks of each other, as reported by KCEN TV.
Who is death of crypto owners? ›The "mysterious" deaths of crypto investors Nikolai Mushegian, 29, Tiantian Kullander, 30 and Vyacheslav Taran, 53, have drawn a lot of internet attention. Russian Crypto Typhoon, Vyacheslav Taran was the latest to die after his helicopter crashed near the French-Italian border.
Who has the biggest personal crypto losses? ›Binance founder and CEO Changpeng Zhao (commonly known as CZ) was the crypto billionaire who lost the most money following the crypto crisis of 2022, with a net worth drop amounting to 82 billion U.S. dollars.