Political status of Puerto Rico

From the Tax Law Offices of David W. Klasing - The IRS is Targeting Taxpayers (and Their Advisors) that Purported to Have Moved to Puerto Rico to Avoid Cryptocurrency Capital Gains

Retrieved on: 
Tuesday, March 2, 2021

Taxpayers may face tax civil penalties and potential criminal tax prosecution due to the sketchy tax advice they received.

Key Points: 
  • Taxpayers may face tax civil penalties and potential criminal tax prosecution due to the sketchy tax advice they received.
  • On January 17, 2012, Puerto Rico passed Act 22 of 2012, also referred to as the Individual Investors Act (IIA), in order to enhance the economic situation of Puerto Rico.
  • To be eligible to claim tax exemptions from the IIA on your tax return, you must be a "bona-fide resident" of Puerto Rico.
  • However, as a U.S. person, a taxpayer who lives in Puerto Rico is still subject to federal income tax on income earned from avenues OUTSIDE of Puerto Rico.