Taxes information on PR

sontek wrote:

My wife and I have been looking into moving to Puerto Rico and finally found the perfect school for our two sons and are ready to move to the island.  We have some questions related to taxes though and I was told to ask you!

1. My wife works for a Texas based company as an employee and will continue to do so remotely when we move, we assume this means she will have to continue paying federal taxes since all her income is US based.   Does she *also* have to pay the Puerto Rican tax?  (28% Federal and then 33% PR?)

Yes to federal, no to PR.

2. I run my own company.  It is a Delaware C-corp but we have subsidiaries in Florida and California since we have employees in both states (I'm the only one in Florida, so we can shut that down once I move).  How do taxes work in this case where I still need to maintain a US based corporation to pay my US based employees, but I'll be PR based?    Will I be double taxed with Federal and PR taxes as well?

This is a bit more involved.

The tax question is simple.  You pay federal tax as you are employed by a Delaware corporation.

Now the trickier part.  As I understand it, you may need to apply to conduct business in PR as a "foreign corporation."  Yes, I know that Delaware and PR are both U.S. but welcome to the red tape of PR business.  From what I remember, it is a simple form, and I believe a $50 annual fee.  I too will likely operate my Virginia LLC in Puerto Rico when we move there.

See in particular the paragraph on foreign corporations here.

I would recommend to find a CPA or tax lawyer to consult with, preferably before you make your final decision to move or not.

Sontek

Absolutely get with an Offshore CPA and Tax Attorney that specializes in PR and knows US. But you may want to dissolve you USA based entities and start fresh and new in PR. We are preparing to do the same and based on my research and the legal counsel I have received, we are starting fresh.

Feel free to PM me your email address and we can discuss further. There is some really good information out there from people that have done this. But as you already know, to get the tax advantages available, you have to tick all the boxes and be approved. But for us, it is worth dealing with the PR headaches to get more freedom. That enables us to grow our business, bless employees, bless others and help bring revenue and investments back to PR, which is blessing us.

Just my 3 Cents!

Yeah, my problem is we have 15 mainland based employees.  I'm the only one moving to the island.  So we can't dissolve the corporations, so I don't think we'll be able to check every box to get the savings offered to people who move their corporation.

I just want to make sure I don't get double taxed or anything like that

10-4

Maybe structuring a new company in PR that the Delaware Company contracts from. That way you could reduce your margins in the Delaware and take a hefty margin in the PR Corp. With proper structure , you can save ALOT on your taxes for Corp and Personal. You would have to draw a Salary from the PR Corp and pay 33% PR Income tax, but on Dividends and Cap Gains you would pay 0%.

Have a blessed day!!

One other thought, if you need to put funds into the Delaware Corp for expansion or whatever, you could do a loan from the PR to the Delaware.

sontek wrote:

I just want to make sure I don't get double taxed or anything like that

Not gonna happen.  Here's an IRS query about Puerto Rico residents and their tax exposure.

Regarding incorporation, it sounds like your company (and the tax man) will simply treat you as a remote employee, earning an income from a U.S. source while residing in Puerto Rico.  Your tax situation will be identical to that of your wife.

I've got a very modest property management LLC.  I expect that when I purchase property on the island, it will be held by the LLC.  As such, I will either need to apply for the license as a foreign corporation or re-incorporate in Puerto Rico.  My suspicion is that we will liquidate our very modest holdings here and have nothing but the Puerto Rico property to manage.  If that's the case, we will likely do as JOS66 seems to have done, and move the corporation.  But it sounds as if your company will have no assets in PR, nor will it provide goods and services there.  If so, I see no reason to move the corporation, and you will not be subject to PR taxes on income from the mainland.

As above, this is free advice, and worth every penny.  Best to consult a professional.