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Exploring a Move

I am a tax attorney/accountant in the US.  My wife is from South America and I am of Latin background.    She of course speaks native Spanish, I speak it quite fluently, near native.  We are considering a move to PR if we qualify for Law 20 circa 2019.  We'd be looking to hire bi-lingual local accountants, and perhaps an attorney, to do tax work for clients in the US.  We are coming to explore the island for two weeks in June.  I thought I'd introduce myself.  This forum has quite a lot of useful information, we certainly appreciate it.

Steuernanwalt

Welcome to the forum.
A few of the members have been dealing with act 20 and 22 but not many.
I would suggest you search the site for some of their posts and also check Facebook I believe there is a group that covers those acts.

There are attorneys/advisors for Act 20 and 22 here in Palmas del Mar, Humacao. They advertise in the local magazine. Shall I send you the contact information?

ReyP & frogrock,

Thank you for your replies.  Frogrock, please do send ads.  I am very familiar with the US side of things where taxes are concerned given my profession.  I have a decent clue on PR side, but nothing can replace talking to people who practice is that area of the law.  I will likely buy a few hours of time from one of them when we visit in June.  As the date gets closer I will post our planned itinerary, perhaps we can invite some of you to lunch & pick your brains about your time in PR.

John Hyre

Update:

We are coming June 5 to June 19 to explore the island.  Whole family of 5 + in-laws + nephew.  I will reach out to several of you.  While there I will probably write for 4 hours per day (sort of like work, but not really as I enjoy it quite a lot) before the teenagers wake up.  We will hit each of OSJ, Luquillo, Ponce, Rincon, Isabela, and Carolina for several days via Air BNB.  We may look for one or two other stops as well, suggestions welcome.  I am looking for 2 good CPA/tax attorneys to talk to about PR tax law (with US tax law "I got it"), including Act 20 & PR taxation of Stateside income.  Referrals welcome.

The major tax issue I need to resolve:  PR gets to a high bracket very quickly, evidently 33% at $60k of net income.  US does not hit a married couple with that rate until about $233k.  That is one heck of a difference!  That differential presents two issues:

-  While most of my income would run-through PR corporation at 4% rate, a very significant chunk will be earned in the US via periodic travel to speak Stateside + one employee who may remain Stateside (as will the income he generates) + rental properties.  My basic understanding is that I will pay US income taxes on such income + PR tax to the extent that it exceeds US rates (and it does, quite quickly).  That could be a real problem unless I can structure around it.  It would offset a fair amount of the Act 20 benefits.

I will also likely hire one or two US attorneys (preferably of PR or Latin descent or open-minded "other" to more easily fit into the culture) to come over with us.  The high rate of taxation on PR salary would be unattractive to them.  Wondering if there are legal work-arounds to help with that.  For example, could I buy a property and let them live in it rent-free in lieu of some salary without that rental subsidy being taxed as salary by PR?

We look forward to exploring and figuring out whether move makes sense, and the best place to settle.  We'll also be looking to the best place to be in order to attract attorneys to live there.

I cannot find passenger vans for rent - any suggestions?  I'd rather not rent two cars for the eight of us if I can avoid it.

I would check this site, they handle act 20 and 22, sounds like this is what you need to me. https://prbusinesslink.com/tax-guides.html

None of the car rentals have vans?
Enterprise has 15 passenger vans for around 550 a week. Others may also.

ReyP: 

Thanks. 

I see the big vans.  Not cheap, but fits the bill.  Gotta decide if two cars (a touch more expensive) beat one big old van (a bit cheaper, but probably unwieldy on some roads).

In re 20/22 website.  Yup, saw that.  Any feel for which of the many providers are best?  I probably need less hand-holding than your average bear.  I do not mind paying for expertise & connections, not interested in paying for the "White Shoe Firm" vibe though.

Thanks again.

SteuernAnwalt

Sorry I don't have enough to do either program, besides what I got it in a regular IRA, converting it will cost me too much.
Don't know either but I do understand there is a Facebook group about it.

Ray P,

Nothing to be sorry about, you are always friendly & helpful.  None of us knows everything, though I have met a few people who certainly think they do!  I saw the FB group.  I could be wrong, it struck me as....rather light.  Time will tell, I have not really reached out to them just yet.

I do a lot of work with self-directed IRA's.  My 401k (kissing cousin to an IRA, they follow very similar rules where self-directing is concerned) buys rental property.  I am far more confident in such investment far more than in the market.

Thanks again, your knowledge and willingness to share it is appreciated.

SteuernAnwalt :

ReyP: 

Thanks. 

I see the big vans.  Not cheap, but fits the bill.  Gotta decide if two cars (a touch more expensive) beat one big old van (a bit cheaper, but probably unwieldy on some roads).

In re 20/22 website.  Yup, saw that.  Any feel for which of the many providers are best?  I probably need less hand-holding than your average bear.  I do not mind paying for expertise & connections, not interested in paying for the "White Shoe Firm" vibe though.

Thanks again.

SteuernAnwalt

A van requires a single driver, 2 cars means 2 people having to drive everywhere. 2 vehicle means more chances of accidents and one getting lost.
Just a thought

As a US tax lawyer who worked for a boutique law firm in Old San Juan, and now works for a big firm in Switzerland, I can say that you can't do effective, legal tax structuring on the cheap.

PR sucks for tax rates and for doing business. It could have chosen a different path, like the UK overseas territories in the Caribbean, but it didn't because doing so would have conflicted with its culture heritage, which is generally anti-business in general and anti-entrepreneurship in particular.

Nomad Lawyer,

I have no problem paying, just not looking to pay more than needful - I get it, given what I myself charge.  I'll merrily pay for good help and, especially in a place like PR, connections.  Anyone in particular you would recommend or shy away from?  I personally believe in the power of word of mouth.  I get a lot of business that way and tend to find vendors the same way.  Which is why I ask.

I hear you on PR cultural proclivities - and it was very politely put.  Most of the PR's I meet Stateside who are political are very to the left.  Passionately & loudly so.  Having thoroughly screwed up their island, the ones who move Stateside look to continue the job here.  That trend makes election time around the I-4 corridor more interesting than I would like.  Add that to certain negative aspects of Latin culture....and I have a pretty good idea of what is in store for me in PR.  The tax savings - if large enough - and the positive aspects of Latin culture should make it worthwhile.  If the tax savings are large enough.  Fallback is Florida - wife gets the weather, beaches and some contact with the Latin world, and I no longer have to pay state & local income taxes.  We are moving from Ohio where the sales and property taxes are only a little lower than FL, and the state + local income taxes pretty high.

Out of curiosity, did you leave because the Swiss opportunity was simply better, or were there things about PR in particular that helped make the decision to leave?  I have only been through Switzerland once and we did not stop.  From what I saw, it is it beautiful.

SteuernAnwalt,
You seem to have a very negative view of PR and its culture, are you sure you want to move to PR? One slip and you may end up in trouble.

To be realistic the latin population in the US is growing, both by birth and by moving to the mainland from PR and other countries. Soon they will be everywhere but not likely in your life time.

Did you try Leaseway or Target Car Rentals? This is not the store named Target, but a different company.

ReyP,

I am very familiar with Latin culture, including what I view as the good aspects, the bad aspects and the "neither" aspects.  Those aspects have been discussed at length here - and largely accurately both as to the positive and the negative.  I have not really addressed those topics here, looks like it has already been done.

The one aspect I did briefly discuss is PR political leanings, which I do indeed view as negative.  That's a far cry from having a very negative view of PR and its entire culture.  What kind of trouble would a "slip" entail?  Someone shouting at me?  Or not talking to me at all?  I have traveled a fair amount in Latin America.  I have not had any such problems.  Indeed, I have found that one can have a frank discussion of reality with most Latins (including many of those who are very much on the "other" side) as long as one is not a complete tool about it.

Would you deny that PR political views trend left?   I normally get as far away from such jurisdictions as I can since the inhabitants tend to view me as a cow to be milked, a mere means to an end, a reason for me to work more and for them to work less.  PR - via its politics & cultural inheritance -  has worked itself into a nasty situation.  Somebody decided that exempting residents who bring some jobs or capital from high taxes might make that nasty situation "less bad".

If I succeed in getting the benefit of Act 20, then I will be largely exempt from PR's tax regime - and its politics.  I'd still have to deal with the Latin-style bureaucracy, which I would tolerate because the tax savings outweigh the hassle.  It is about the money!

This should not be a surprise to anyone.  Why would I voluntarily move somewhere that takes away a very big chunk of my life?  Sans Act 20 I can get beaches, architecture, tropical weather, laid-back culture and even the mfongo elsewhere a lot cheaper.

That is the cold, hard truth.  It is doubtless "offensive" to those who wish that the cow would shut up and give them lots of "free" milk.

Frog Rock,

I need to check with She Who Maketh the Rules.  If she has not looked at those companies, I will certainly add them to the list.  Thanks for the insight!

SteuernAnwalt,
One of our members DavidX is sort of an expert on act 20 or 22, not sure which. You may want to send him a private message, introduce yourself and tell him what you are unclear about and what sort of help you are looking for. 
I PM him a minute ago about you.
Good Luck
Rey

SteuernAnwalt,

"If I succeed in getting the benefit of Act 20, then I will be largely exempt from PR's tax regime - and its politics.  I'd still have to deal with the Latin-style bureaucracy, which I would tolerate because the tax savings outweigh the hassle.  It is about the money!"

The best combination would be to acquire an Act 20 along with an Act 22, in this way, you would have all your bases covered as best as possible for now.  Depending on your particular situation, there are numerous other Acts available that you can apply for as well, in addition to, or in lieu of Act 20 and/or Act 22, for example: finance, banking, insurance, etc.  Word of caution; I would not contemplate moving there until all Decrees are in hand, approved, signed, notarized, and accepted by them with proof thereof, many hoops to jump through.

CA GUY :

Word of caution; I would not contemplate moving there until all Decrees are in hand, approved, signed, notarized, and accepted by them with proof thereof, many hoops to jump through.

It's amazing how a program designed to encourage business immigration could be made so stupid complicated by politicians.

In PR it's all too predictable. Worse bureaucracy than many countries in Latin America!

Rey P, thanks.  If Dave X's surname has 5 letters and starts with an S, I think I know him.  Contacts are always helpful.  I've gotten a few other names of people who moved to PR for 20/22, I look forward to the down & dirty view.

CA Guy, thanks for the advice.  No signed papers, no move.  Makes sense.

Nomad Lawyer - wow.  I have dealt with other Latin bureaucracies and was amazed (appalled).  They make the US system look efficient and friendly.  If PR is even worse.....well, just "wow".  But I am not entirely surprised, it fits the profile that is forming in my mind.

Thanks all again for the feedback.  If we end up going through with a move to PR it will be with eyes wide open.

So PR apparently taxes anything over $60,000 at 33%.  The US does not hit that tax bracket until $250k if you are married & filing a joint return.  Meaning:  Well paid (or even entry-level) professionals would pay far more tax in PR than in the US.  Add PR's well-publicized problems to the mix.....and attracting talented help (in my case lawyers) to move to PR & work for my Act 20 company will be a non-trivial challenge.  Such is the nature and effect of anti-business policies and a greedy populace that has "rights" to other peoples' money.

I will be speaking with PR CPA's to see if I can provide benefits to employees (e.g. - company-paid housing) that are not considered "wages" & not taxed at those absurd rates. 

Otherwise I may have to change the game plan.  Perhaps I should hire lower-paid help (paralegals?) who are taxed at lower rates.  The irony of the system driving me to look to employ people for less should not be lost on those paying attention.

<sigh>

I suspect that once I look at the labor laws in PR, hiring others will become even less appealing.  Pile on enough costs & hassle and the Act 20 tax savings, attractive as they are, may not be worth it.

I decided not to comment and eliminated the previous text.

One thing is giving advice, another is been downright negative. If you have such a bad option of the island and it's people, why even consider moving here. But I guess you just like controversy.

Good luck on your "exploration " , with that mentality you gonna need it!!

And this is my only and last comment on this tread. Not woth anymore of my time.

Hi! Might want to look in to Alamo rentals. It's at the airport so it's convenient. Not sure if they do passenger vans. If you take two cars keep in mind finding and paying for parking for each car and also trying not to get seperated if following. Some roads are very confusing with non marked or last minute exits and very short merging lanes. A pro though if one group wants to do something else or not up to going out you don't have to take a van!
The island is what it is, you'll have to see if it's worth it in the end making the move or maybe Florida is the better choice.  Though, 33% brought tears to my eyes filing taxes this year wondering where the hell all that money goes when services clearly lack.
Good to know for professionals coming to the island about the tax rate.

Justpeachyy,

Thanks for the comments.  We probably will go with the passenger van.  Driving such an unwieldy beast makes me nervous - physical coordination is not my strong suit.  But the advantages that you & others mentioned are on point.

And yeah, I prefer to know what I am getting into, both the good and the bad.  That is why we are coming to look.  I presently think we can work around the issues...but best to do reconnaissance first. If we do end up in FL....well, that beats a bad fit on the island.  Doesn't mean it's a bad shake for others, just not our thing.  And if we do end up in PR - it'll be after having done the homework with eyes wide open.

We do need to take into account our ability to bring in outsiders or hire local professionals.  I cannot imagine that bringing someone in and their "discovering" the tax rate would go well.  And I also know that if I were coming in as an employee, I'd ask for a big mark up in salary to cover the taxes.  Such a cost is non-trivial to the guy who has to cut the check.  But it also may be evitable....with high-tax systems there are often loopholes to ease the pain.  For example:  The reason US health insurance tends to be tied to one's job has to do with distortions caused by the tax system.  Back in the 30's & 40's when top marginal rates were in the 90% range (talk about greedy & screwed up), any perk that could be paid by an employer tax-free became very valuable indeed.  So US employers started paying for healthcare that way & insurance tended to get tied to the job.  Talk about an unintended consequence!  Part of our homework is to now see if similar loopholes exist in PR law so that we can pay good compensation without jacking up labor costs to cover comparatively high taxes.  Otherwise those costs eat into the benefit of Act 20.  We'll see what we find.

Adlin20,

Thanks for the hit & run.  Seems like some people are very easily offended, both in US & PR, nothing new there.  I notice that neither you nor Rey challenge the accuracy of what I wrote (e.g. tax rates, labor laws).  You just dislike the "condescension" and "negativity".  Well, OK dislike away, that is your prerogative.   

i stand by my opinion:  The people of PR are not passive victims.  They made consistent choices and are complicit in the present situation.  Ditto Americans and their present situation. Plenty of greed to go around, PR hasn't a monopoly on it.

Choices have consequences.  And that is true whether or not you want to hear it. 

I like the warmth and friendliness of PR's populace, which I am evidently permitted to talk about.  I dislike the Rosie Perez attitude & politics (and especially the tangible, costly results of those politics such as high taxes & high labor costs), which I am evidently not supposed to mention.  Both aspects are relevant in deciding whether to live in PR.

Just curious, what is a Rosie Perez attitude? What does she have to do with any of this?

i took Steuerenanwalt's comments to be a good faith analysis of the PR investment environment. Yes, some of his conclusions were not positive, but the proof is in the pudding, as they say. I believe his comments accurately reflect the risk vs. reward calculation that any potential investor in PR would do as part of their due diligence. Remember, he has a responsibility to his family, other potential investors and employees to ensure that whatever investment arrangements he makes in PR work financially. One has to be critical when in such a position.

SteuernAnwalt :

So PR apparently taxes anything over $60,000 at 33%.

This probably doesn't apply to you as I assume you are much higher than 60k, but the marginal rates leading up to 60k are lower, my rough calculations are $2700 in savings at 61.5k income. 

So lets play catch up
US RATES:
61.5 to 91.9 @ 25% = 7.6K
91.9 to 191.7 @ 28% = 28k

PR RATES
61.5 to 191.7 @ 33% = 43k

So at 192K in income you will pay $4.7k more in income tax living in PR

BUT, you are not paying state income tax, so put my GA income tax of 6% ~ 11k and I save $6.3k living in PR and making 191k in income. Anything above 191k is icing on the cake.

Than, we have ACT 22, if you are being affected by these rates I assume you have capital gains, interest and dividends, so pile on the savings. Also, as you know, the business owner with ACT 20 is paying 4% income tax and 0% on distributions, so that's a ton of money saved, and a decent boss forcing you to move to PR should pass some of that on.

Next, if someone could tell me, are married people required to file jointly living in PR? I am currently filing single so this doesn't apply to me, but that would need to be considered for married people.


SteuernAnwalt :

I suspect that once I look at the labor laws in PR, hiring others will become even less appealing.  Pile on enough costs & hassle and the Act 20 tax savings, attractive as they are, may not be worth it.

This is something I am not as familiar with, Currently I employ 3 people, so if I act 20 in PR, I would basically look to hire low wage workers out of necessity, However I already have 2 of the 3 or 5 required employees myself and my girlfriends. But, if you could elaborate on the labor laws, or have any advice on how that may affect my situation.

I am 2 years out from my move to PR, but, digging into the taxes is the most important thing for me. I am structuring my future business endeavors, my investment income and honestly my entire lifestyle around tax incentives.

edit: for what it's worth, I am not moving to PR solely because of the tax incentives, we went on vacation there and loved it.

Nokkieny,

Good stuff, appreciate it.  Swamped right now, will not be able to examine and digest for a few days.  But examine, digest & reply I shall.

For those who are interested, here are the probable changes to Act 22 and Act 20, they are retroactive to inception of the laws, in other words, it affects anyone who has had a decree since day one.  For Act 22, it is an additional, annual backdoor tax to the decree, as well as other changes.  For Act 20, it reduces employees required, on a per case basis.  Use Google translate:

GOBIERNO DE PUERTO RICO
18va Asamblea             1ra  Sesión
       Legislativa     Ordinaria
       
SENADO DE PUERTO RICO
P. del S. 369
8 de marzo de 2017

https://www.google.com/url?sa=t&rct … jkETWkTiqg

GOBIERNO DE PUERTO RICO
18va Asamblea            1ra  Sesión
       Legislativa         Ordinaria
       
SENADO DE PUERTO RICO
P. del S. 368

8 de marzo de 2017

https://www.google.com/url?sa=t&rct … mZ88GO2O8A

Act 22, So $5k a year donated to local non-profits, I assume that is tax deductible. I am a bit confused about the long term capital gain language my translation is a bit iffy and I dont see the images it is referencing. But it sounds like possibly a 5% on long term capital gains made before moving to puerto rico and realized after 10 years of residency.
Also, I assume there is still a $5k one time initial fee + filing fees and possibly a yearly filing fee.

So, sounds like I need to start non-profit :P

I am totally lost on the language for act 20, employee reduction.

This helps:
http://prbusinesslink.com/article/propo … -2017.html

Also, need to keep an eye on this Act 22 repeal bill:
http://caribbeanbusiness.com/bill-filed … ncentives/

I don't really like how fickle this all is, it can be amended and repealed at anytime, I always sough assurance that it wouldn't expire for 20 years or whatever.

Here's a question. If ACT 20 and ACT 22 did not exist, would you still want to move to Puerto Rico?

frogrock :

Here's a question. If ACT 20 and ACT 22 did not exist, would you still want to move to Puerto Rico?

Yes, But instead of bringing my business over, I would simply retire. I would focus on keeping my income from rental properties below 61.5k, so I am not in the highest tax bracket and I would likely focus more on rental properties than financial investments, not having ACT 22.

My advice based on my personal experience.  RETIRE ASAP.  I have absolutely no regrets about retiring 'early'.  The career was great. Ditching the working world was even better.  Then come and play in Puerto Rico.  You will find new great adventures.  Use your acquired life skills, yet  get ready to   develop some new "I always wanted to try that" skills.

NomadLawyer :

i took Steuerenanwalt's comments to be a good faith analysis of the PR investment environment. Yes, some of his conclusions were not positive, but the proof is in the pudding, as they say. I believe his comments accurately reflect the risk vs. reward calculation that any potential investor in PR would do as part of their due diligence. Remember, he has a responsibility to his family, other potential investors and employees to ensure that whatever investment arrangements he makes in PR work financially. One has to be critical when in such a position.

People seek out facts that support their own views and don't like to hear facts that don't support their own views.  Some people claim the beaches are beautiful and the very next post is how trash, including glass bottles, is strewn everywhere.  One guy posts he's continually dealing with power outages on an extended, more frequent basis and the next person says "Power?  We don't need no stinking power!"  Someone says PR has bottomed out and others say PR doesn't even see the cliff coming up.  All I'd say its that anyone who is considering an investment or permanent move tap the brakes and test drive the country for at least a year.  Frankly, there are too many moving parts right now to know who is right, IMO.

The sky is not falling yet, what happens in one beach does not happen in another. Yes, there are power outages every day in one town but not all, typical a few and I mean a few thousand will lose power one day, but there are millions of people just fine.

If it was that bad the expats in the island would be complaining constantly.

Lets hear from those living in the island, let the newcomers know the truth.

ReyP :

The sky is not falling yet, what happens in one beach does not happen in another. Yes, there are power outages every day in one town but not all, typical a few and I mean a few thousand will lose power one day, but there are millions of people just fine.

If it was that bad the expats in the island would be complaining constantly.

Lets hear from those living in the island, let the newcomers know the truth.

What I have found is that electric and water company are very active on twitter posting when services will be down and also people reporting outages in their area.
Electric is @aeeonline  water is @acueductospr. On average I'm without power 3- 4 times a month and water about twice a month. No generator and now have a working cistern.

Also internet with liberty has one too @libertypr.

I must say some "tweets" are hilarious, someone recently said electric is preparing people on the island for hurricane season with the constant and long outages.

A lot of people have generators and a cistern.
That frequency is not normal (3-4 times a month), what town are you in?

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