Summary:


Act 22 permits persons who have not been a resident of Puerto Rico at any point since January
12, 2006 to move to Puerto Rico and, as a result, reap significant tax benefits.


What is Act 22?


Act 22 was created to encourage individual investors to relocate to Puerto Rico by providing a
total exemption from Puerto Rico income taxes on all passive income realized or accrued after
such individuals become bona fide residents of Puerto Rico. Act 22 decrees are currently slated
to last until December 31, 2035.


Who is eligible?


Any person who becomes a bona fide Resident of Puerto Rico who has not been a resident of
Puerto Rico at any time since January 12, 2006.


What are the tax benefits of an Act 22 decree?


     Earnings generated after becoming a bona fide Resident of Puerto Rico.
     0%Tax Rate on interest and dividends.


     0% Tax Rate on the total net capital gains (both long-term and short-term).


     Note: this includes the capital gains on securities that were acquired prior to
     becoming a Resident as long as they are realized and recognized after becoming
     a Resident.


    Earnings generated before becoming a bona fide Resident of Puerto Rico.
    10% Tax Rate on net long-term capital gains realized but not recognized prior to
    becoming a Resident but not yet recognized if the recognition takes place within 10
    years of becoming a Resident.


    5% Tax Rate on net long-term capital gains realized prior to becoming a Resident but
    not yet recognized if the recognition takes place after 10 years of becoming a Resident.


What are the requirements to obtain an Act 22 decree?


1. Become a Bona Fide Resident of Puerto Rico
 

A Puerto Rico bona fide resident is an individual who is domiciled in Puerto Rico. Physical
presence in Puerto Rico for a period of 183 days during the tax year (January 1 through
December 31) will create a presumption of residency for tax purposes. However, it is not
enough.


Additionally, the person cannot have a “tax home” outside of Puerto Rico. Your tax home is the
center of all your economic activity. For instance, your principal office is a tax home.


Finally, the person must maintain “closer connections” to Puerto Rico than any other place. This
is a subjective requirement. However, in order to satisfy the IRS, it must be taken seriously. The
individual must establish social, political, cultural, professional and religious ties in Puerto Rico.
Recommended actions include obtaining a PR driver’s license, registering to vote in PR, joining
organizations in PR (church, non-profit, etc.), and having bank accounts in PR.


2. Purchase a residence in Puerto Rico within 2 years of applying for Act 22.


3. Pay a $5,000 Fee.


4. Make an annual $10,000 Donation to a PR Non-Profit