Wealthy cryptocurrency traders and fund managers who may have illegally benefited from tax breaks in Puerto Rico are currently under investigation by US Attorneys and Internal Revenue Service (IRS) agents. According to Bloomberg, civil and criminal charges are being filed against several individuals who allegedly lied about their residence and income to obtain false tax deductions. The investigation also extends to lawyers and accountants involved in promoting Puerto Rico's tax scheme, with at least two criminal investigations expected to result in charges soon. US federal prose cutors are cooperating with IRS agents and Puerto Rican officials in these cases.
Since 2012, over 5,000 Americans have relocated to Puerto Rico to take advantage of the country's tax policy, which offers significant federal income tax savings. The policy provides a 100% exemption on dividends, a 60% exemption on municipal taxes, and zero federal tax on income earned within the region. Additionally, more than 3,600 businesses have been able to avoid paying taxes on income and profit dividends, paying only a 4% export tax. However, while the tax incentives are generous, the requirements to qualify for them are stringent.
To be eligible for the tax deduction, new residents must demonstrate that they spend at least 183 days per year on the island and consider it their "tax home." However, lawyers familiar with the system suggest that some individuals have resorted to fabricating numbers and cheating on their tax returns to meet these criteria. Notable figures who have relocated to Puerto Rico for tax purposes include Peter Schiff, a gold buff, and Michael Terpin, a cryptocurrency investor.
While the tax breaks have attracted wealthy residents, the tax plan has faced protests, with critics claiming that the influx of super-rich residents has increased the cost of living and perpetuated a "colonial" situation with low taxes. Despite the ongoing investigations, some Individuals, like Terpin, remain unfazed and confident in their compliance with tax regulations. The tightening investigations serve as a warning that authorities are cracking down on potential tax fraud and pursuing charges against those who may have exploited Puerto Rico' s tax incentives.
