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Invest in Puerto Rico


 

Why Puerto Rico for Real Estate Investments?

A Matter of Tax Incentives and Other Benefits

BACKGROUND

Puerto Rico is 100 miles long by 35 miles wide, with a total area of 3,508 sq. miles. The terrain consists of mostly mountains with coastal plain belt in the north; mountains precipitous to sea on the west coast; and white sandy beaches along most coastal areas. Puerto Rico is the smallest of the Greater Antilles, and consists of the main island of Puerto Rico and several smaller islands and keys, including Vieques, Culebra and Mona.

The Island is located in the Caribbean Region, with great proximity to the Dominican Republic by the west (separated by the Mona Passage, a key shipping lane to the Panama Canal), few miles away to the US and British Virgin Islands by the east, on the north is limited by the Atlantic Ocean and on the south by the Caribbean Sea. Puerto Rico is about 1,000 miles southeast of Miami, Florida.

Puerto Rico was first “discovered” by Christopher Columbus during his second voyage to the “New World” in 1493. From its discovery until 1898, Puerto Rico was a Spanish colony. After the Spanish–American War, Puerto Rico first became a U.S. territory, and in 1917, the U.S. Congress granted Puerto Ricans U.S. citizenship.

In 1952, the territory became the Commonwealth of Puerto Rico according to the tenets of both the U.S. and the Commonwealth Constitutions. Today Puerto Rico functions much like any state in the Union. The U.S. dollar is the local currency. Federal laws apply in Puerto Rico. Together with the U.S. and Canada, Puerto Rico enjoys one of the most stable governments in the Americas.

Puerto Rico is divided in 78 municipalities with the city of San Juan as the capital. With Spanish and English as the official languages and literacy rate of 94.1%, Puerto Rico is considered one of the most developed countries in the Caribbean and the Latin America Regions.

Puerto Rico has the most diverse, dynamic and solid economy in the Caribbean region, with manufacturing, services and construction as the most important segments. Encouraged by duty-free access to the US and by tax incentives, US firms have significantly invested in Puerto Rico for more than 50 years.

In the manufacturing area, pharmaceutical, hardware and software are a major force. Main service sectors include financial services with banking, investment banking and insurance well represented; and professional services with health, legal, advertising, accounting, engineering, research and consulting leading the way.

Out of the Fortune 100 Companies, 55 have operations in the Island and, among the Fortune 500, the number increases to 178.

The Island’s state-of-the-art telecommunications system allows instant access to the U.S. mainland and to international markets via the latest high-speed technologies.

As a developed economy, Puerto Rico offers a modern, sophisticated, efficient and developed infrastructure, including transportation, utilities, telecommunications and financial systems. The Port of San Juan is one of the largest commercial marine ports in the Western Hemisphere and ranks second only to Miami as the cruise ship capital of the world with over 2 million passengers.

Even though Puerto Rico is part of the US, its special relationship with the US allows it to enjoy fiscal autonomy. Puerto Rico also offers attractive tax incentives that can be used to effectively attract buyers from the US and international markets.

In essence, Puerto Rico offers a unique set of appeals, advantages and benefits that make it a very desirable location for real estate investments and an ideal domicile for all buyers.

The following are some of the many benefits that Puerto Rico has to offer:

  • No need of US passport
  • The U.S. federal government has jurisdiction over all the areas generally controlled by the federal government in any state, except in fiscal matters where Puerto Rico has fiscal autonomy.
  • Puerto Rico offers a very low risk environment for investors given that it is part of the U.S., which provides political stability and no exchange fluctuations
  • Residents of Puerto Rico and companies domiciled in this island do not pay Federal Income Taxes. However they do pay local income taxes which are quite similar to those of the United States (in fact, the local tax code is modeled after the U.S. Internal Revenue Code).
  • It should be noted, that with few exceptions, taxes paid to the Commonwealth of Puerto Rico can be deducted dollar for dollar from Federal Income Taxes.
  • The Judicial Branch in Puerto Rico also operates much as in any other state in the union with local courts having jurisdiction over local matters and federal courts over federal matters.
  • Well-educated, bilingual, highly skilled, productive workforce that is loyal and capable of maintaining high quality standards.
  • Benefits from a wealth of facilities and infrastructure
  • A favorable business environment
  • The most diverse, dynamic and solid economy in the Caribbean region, with manufacturing, services and construction as the most important segments.
  • As a developed economy, Puerto Rico offers a modern, sophisticated, efficient and developed infrastructure, including transportation, utilities, telecommunications and financial systems.
  • High Standards of Medical Care and Services ( Medicare is accepted)
  • World-Class, Sophisticated Quality Educational & Research Institutions
  • Cosmopolitan Environment
  • Tropical Paradise
  • Laws 132 and 216 for the Stimulus of the Economy and Housing Industry were enacted in 2011, and provide certain benefits in phases. At present these incentives are:
    • No future capital gains on new residential property purchased and 50% reduction on future capital gains for existing property
    • No recording fees for new residential property purchased and 50% reduction in recording fees for existing property
    • No capital gains taxes on sale of existing property and $5,000 deduction from ordinary income for capital loss on sale of existing home for up to 15 years
    • Residential rental income is tax exempted until 12/31/20
    • 5 years property tax abatement on new residential property
  • Puerto Rico Tax Incentives
    • Residents of Puerto Rico and companies domiciled in the island are not subject to Federal Income Taxes.
    • Income derived from services rendered to parties outside of Puerto Rico can be up to 94% tax exempt.
    • 80% Threshold requirement
    • Passive income derived by new residents will also be tax exempt under new legislation.
    • 15 Year non-resident threshold
    • Non U.S. residents can obtain a “Green Card” / U.S. resident status if a minimum $500,000 investment is made and they meet other U.S. State Department requirements.
  • Acquisition costs for the seller are only 1% of the deed and 1% for cancellation of the existing mortgage; in addition to the real estate broker commission.
  • Ownership records can be determined from the Office of Registry of Property
  • Mortgages are available to foreign buyers.
  • There are both primary and secondary mortgage markets
  • The real estate process is similar to that of any state in the US
  • Proximity to the US and British Virgin Islands
  • “Bahía Urbana” (www.bahiaurbana.com): An exciting new revitalization project coming to the San Juan Waterfront, one of the Caribbean’s untapped urban jewels
  • Exceptional Availability of Diverse Luxury Residential and Resort Housing Opportunities at Very Attractive Prices

Note: All legal and tax benefits must be validated with Legal Counsel prior to investing.