The Internal Revenue Service (IRS) is going after tax evaders who abuse Puerto Rico’s tax system. bloomberg Reported July 12th.
Puerto Rico has offered significant tax incentives to cryptocurrency traders, hedge fund managers and other US investors since 2012. This policy allowed some investors to legally avoid paying federal income tax, leaving dividends, interest and capital gains income completely tax-free.
To be eligible for Puerto Rican taxation, investors must reside in Puerto Rico for at least 183 days each year and maintain close local ties. bloomberg Additionally, since 2012, more than 5,000 US citizens and 3,600 businesses have reportedly qualified for tax incentives.
But despite Puerto Rico’s tax cuts being legal, investigators are now looking into whether investors have been honest about how long they’ve lived on the island and where their income comes from.
At least two criminal investigations, including one involving U.S. lawyers, could soon be indicted, it reported. Bloomberg’s sauce. Charges could reportedly include conspiracy and wire fraud. In addition to taxpayers, the survey also includes promoters, lawyers and accountants who have promoted tax programs.
Bloomberg noted that BDO Puerto Rico accountant Gabriel F. Hernandez was indicted in October 2020 on wire fraud charges related to the IRS report. He said the charges from the latest investigation would be the first since that incident, but the case is pending.
Taxes are attractive to Americans, but not to locals
Bloomberg noted that while U.S. investors have benefited from the tax policy, local residents have voiced their opposition to the scheme. Puerto Ricans say the policy will boost real estate prices and favor Americans.
There were similar reports in 2022 when locals protested over the policy. Bloomberg referred to these demonstrations in its latest report.
But locals criticize the influx of wealthy Americans, who have inflated property prices and pay far less taxes than local Puerto Ricans. Opposition has grown with the introduction of legislation reforming incentives and sporadic protests against the arrival of these low-tax “settlers.”
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