Prosecutors from the United States and agents from the Internal Revenue Service (IRS) are reportedly investigating wealthy crypto traders and fund managers suspected of illegally benefiting from Puerto Rico’s tax breaks.
According to a June 12 report from Bloomberg, investigators are currently building civil and criminal cases against a number of hedge fund managers, crypto traders and other wealthy Americans who may have lied about the nature of their residency and key elements of their income in order to take unfair advantage of the tax breaks.
Officials from the U.S. are also delving into attorneys and accountants responsible for marketing the island territory’s tax program, with at least two criminal investigations expected to result in charges in the near future. Prosecutors are reportedly looking at conspiracy and wire fraud charges.
Many claimed Act 22 would drive investment to Puerto Rico and bring untold benefits.
Unfortunately, it’s only worsened inequality & turned PR into a tax haven.
We need a serious analysis from the Federal gov’t on the impact of Act 22 & its ability to help Puerto Ricans. https://t.co/eBxrW2zmP7
— Rep. Nydia Velazquez (@NydiaVelazquez) May 31, 2023
Recalling a conversation with a U.S. federal prosecutor, attorney Carlos Ortiz said the prosecutors were working with “IRS agents” as well as officials from Puerto Rico.
“The message is the noose is tightening.”
Since Puerto Rico introduced its new tax policy in 2012, more than 5,000 American individuals relocated to the country, one of the benefits of doing so includes saving onfederal income tax.
Puerto Rico’s tax policy grants individuals a 100% exemption on dividends, 60% exemption on municipal taxes and zero federal taxes on source income earned within the region.
Additionally, more than 3,600 businesses have been able to avoid paying tax on dividends from earnings and profits and are only required to pay 4% tax on exports.
While the tax benefits stand as some of the most relaxed in the world, the requirements to take advantage of them are quite strict.
To qualify for the tax breaks, new residents must be able to prove that they live on the island for at least 183 days of each year and that the island territory is their “tax home.”
These stringent rules reportedly tempt many individuals to fudge numbers and cheat on their returns, according to lawyers familiar with the regime.
Notable residents who relocated to Puerto Rico for tax reasons include gold…
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