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How would you like to make over $1M per year in your corporation and pay as little as 4% corporate tax rates? While at the same time being exempt from personal taxes on dividends from that corporation? That would mean effectively eliminating double taxation and minimizing actual taxes all in one single blow!

This can actually be accomplished by owners of business-to-business corporations selling services to the United States.

As with all tax rules, you can only get this benefit by obeying the tax rules. In this case that includes moving a business to Puerto Rico and having income sources in Puerto Rico for that business.

Moving to Puerto Rico to Avoid Taxes

Puerto Rico
Effective Tax Rates

If you’re a U.S. citizen, you can take advantage of the Puerto Rico tax exemption if you decide to move there and become a “qualifying new resident.” As long as you follow the guidelines, you may be able to get Puerto Rico sourced income without actually moving there. That’s assuming, of course, that you don’t actually want to move there.

Under Act 22, individual investors can purchase property in Puerto Rico and apply for residency. As a resident, they can receive tax exemption on all dividend and interest income and long-term capital gains accrued after becoming a qualifying new resident.

What are the Tax Rates and Incentives to Move to Puerto Rico?

You may be able to save on your taxes by moving to Puerto Rico. It might sound like a very distant fantasy, but with the right circumstances and the proper incentives, it may not be as crazy as it sounds. On the other hand, you should know that there are some requirements that must be met.

Whether or not you’re interested in living in Puerto Rico (or if you’re from there), there are some tax benefits that individuals and businesses can get from moving to the island territory. By moving to Puerto Rico through one of the tax programs – which require you to have NOT lived there in the last fifteen years – you can take advantage of a 4% income tax rate, 0% dividend rate, and 0% capital gains tax rate. You and your business ACTUALLY need to move to Puerto Rico. It has to become your “tax home”.

As you probably know by now, this is one of many alternatives for lowering your tax bill.  

What are Some Other Ways You Could Reduce Your Tax Rates

While it’s hard to predict every situation, there are a few ways you can reduce your tax bill. Here are 7 alternative ways to reduce your tax bill this year:

  • Make sure to claim all of the deductions and credits you can.
  • Consider contributing to a traditional IRA or 401(k) .
  • Fund a health savings account with money you can use for medical expenses.
  • Sign up for a flexible spending account.
  • Make a charitable donation.
  • Harvest losses from underperforming stocks.
  • Make sure to keep solid records of business expenses.

We Serve Clients All Over the United States, But We Are Proud to Call Utah Home

If you’re ready to find out more about tax planning and how to move your business to Puerto Rico, let us show you how we can help.

We’re located in Utah County and serve customers nationwide, so don’t hesitate to call us regardless of where you are located. We look forward to answering any questions you may have.