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Puerto Rico Poised to be a Cryptocurrency Mecca with Zero Taxes
Investors are increasingly relocating to Puerto Rico for its huge savings on individual and corporate taxes (thenationalnews.com). High-earning investors in the U.S. pay up to 20 percent in capital gains tax and as much as 37 percent on short-term gains; whereas, in Puerto Rico, they pay nothing (thenationalnews.com). Likewise, companies based on the American mainland pay 21 percent in federal corporate tax plus an individual state tax, compared with only 4 percent on the island (thenationalnews.com). This makes Puerto Rico attractive for some investors, especially as the cryptocurrency market's spectacular growth continues.
According to The National, "The presence of digital currency enthusiasts is already palpable on the small island, where chance encounters and networking opportunities abound: run-ins at taco stands, dinner at luxury apartments, and 'Crypto Monday' gatherings at hotels and restaurants across San Juan" (thenationalnews.com). Cryptocurrency funds Pantera Capital and Redwood City Ventures are among those that have established offices on the island (thenationalnews.com). Some people are relocating to Puerto Rico to be with their "crypto friends" (thenationalnews.com). According to Giovanni Mendez, a corporate and tax lawyer advising those who relocate, now "it is not just, 'Move to Puerto Rico to save tax. It is 'Move to Puerto Rico because everybody is there'" (thenationalnews.com).
"The Puerto Rican government created the tax breaks in 2012 with the hope of infusing the island's struggling economy with cash and diversifying its job pool" (thenationalnews.com). Hedge funds gradually began to seek footing on the island, but what has caused the increase of arrivals is the COVID-19 pandemic, which initiated a shift away from big cities and popularized remote work. The recent explosion in cryptocurrency markets has also caused a large influx.
Proponents of Puerto Rico's tax breaks describe them as not only a boost for an island that has struggled with bankruptcy for more than four years--prolonged by hurricanes, earthquakes, a political scandal, and the pandemic--but an opportunity for reinvention (thenationalnews.com).