5 ms·

I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden. Of course, as the current situatio

I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden. Of course, as the current situation demonstrates, not being under the Federal taxation umbrella has certain disadvantages.

zeroer 9y ago
Wait. I though Puerto Ricans were only exempt from federal income tax on Pueto Rican-sourced income.
- dustinmr 9y ago
  Here's a local law where if you meet all the criteria (income made off the island, spend > 180 days per year here, various other criteria), you're exempt from income taxes here. And since you're a resident, all your income is here. Effectively exempting you from federal income taxes. The idea was to attract high net worth individuals to spend money here. Every analysis I've seen says it has worked quite well.
  - martinald 9y ago
    Crazy. So if you move to PR but making money from other US based interests you get exempted from US federal income tax, but if you move and work permentantly in say Germany, you still get charged US Federal Income tax?
    - enraged_camel 9y ago
      Here's the relevant IRS rule: https://www.irs.gov/taxtopics/tc902.html https://www.irs.gov/taxtopics/tc902.html
      - dustinmr 9y ago
        The relevant laws in PR are Laws 20 and 22. https://www.the2022actsociety.org https://www.the2022actsociety.org
    - djsumdog 9y ago
      That was my question. The US is one of two countries where US citizens are required to file taxes even if they're not living in the country (the other is Eritrea).
      - dustinmr 9y ago
        If I remember correctly, PR and Guam are the two places in the world where your income is exempt from federal income tax, if you pay local taxes. There are some exceptions to that. It's supposed to give some local autonomy to the taxation process and fiscal management.
    - cr1895 9y ago
      https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore... I'm not familiar with the Puerto Rico situation, but elsewhere, some (likely significant) portion of your foreign-earned income may be excluded from your US tax burden. For most people who earn money abroad this means that while you must file taxes, you likely don't pay anything to the US Gov't on foreign-earned income. I find the whole taxation-by-citizenship thing ludicrous and coupled with the separate Foreign Bank Account Reporting for accounts having more than $10k taxes are a headache for Americans living abroad.
  - deleted 9y ago
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- deleted 9y ago
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DaiPlusPlus 9y ago
Wouldn't he still have to pay the income tax if he repatriates the money?
- Animats 9y ago
  No. Puerto Rico is part of the US.
thaumasiotes 9y ago
> I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden. Based on a couple of minutes of reading from wikipedia ( https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico ), it sounds like the federal income tax is only eliminated as to income from sources in Puerto Rico. If your income is mostly capital gains from your vast stockholdings, what's the "source"? How exactly is this working? Do you have to be invested exclusively in stocks listed in Puerto Rico? (Do those exist?) Do you have to be exclusively invested in Puerto Rico government bonds? Is his hedge fund incorporated in Puerto Rico, and that's enough?
- anigbrowl 9y ago
  Shell companies are your friend. You can move a lot of money around faster than the authorities can follow the paper trail in many cases. That's why some people refer to delaware as the world's biggest tax haven - Delaware is extremely friendly to corporations and it's trivially easy to set one up. So if you are skilled in the technicalities of company formation and business administration, you can make your audit trail very difficult to follow.
  - thaumasiotes 9y ago
    OK, but a shell company in Delaware sounds pretty useless as a means of sourcing your income from Puerto Rico.
    - anigbrowl 9y ago
      How about I have three shell companies, and you guess which one has the real source of my income underneath it? $5 to to win $10.
      - thaumasiotes 9y ago
        At least offer $15, geez. $5 to win $10 is a money loser even when you have income under one of the shell companies. :p

zeroer 9y ago

Wait. I though Puerto Ricans were only exempt from federal income tax on Pueto Rican-sourced income.

dustinmr 9y ago
Here's a local law where if you meet all the criteria (income made off the island, spend > 180 days per year here, various other criteria), you're exempt from income taxes here. And since you're a resident, all your income is here. Effectively exempting you from federal income taxes. The idea was to attract high net worth individuals to spend money here. Every analysis I've seen says it has worked quite well.
- martinald 9y ago
  Crazy. So if you move to PR but making money from other US based interests you get exempted from US federal income tax, but if you move and work permentantly in say Germany, you still get charged US Federal Income tax?
  - enraged_camel 9y ago
    Here's the relevant IRS rule: https://www.irs.gov/taxtopics/tc902.html https://www.irs.gov/taxtopics/tc902.html
    - dustinmr 9y ago
      The relevant laws in PR are Laws 20 and 22. https://www.the2022actsociety.org https://www.the2022actsociety.org
  - djsumdog 9y ago
    That was my question. The US is one of two countries where US citizens are required to file taxes even if they're not living in the country (the other is Eritrea).
    - dustinmr 9y ago
      If I remember correctly, PR and Guam are the two places in the world where your income is exempt from federal income tax, if you pay local taxes. There are some exceptions to that. It's supposed to give some local autonomy to the taxation process and fiscal management.
  - cr1895 9y ago
    https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion https://www.irs.gov/individuals/international-taxpayers/fore... I'm not familiar with the Puerto Rico situation, but elsewhere, some (likely significant) portion of your foreign-earned income may be excluded from your US tax burden. For most people who earn money abroad this means that while you must file taxes, you likely don't pay anything to the US Gov't on foreign-earned income. I find the whole taxation-by-citizenship thing ludicrous and coupled with the separate Foreign Bank Account Reporting for accounts having more than $10k taxes are a headache for Americans living abroad.
- deleted 9y ago
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deleted 9y ago
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DaiPlusPlus 9y ago

Wouldn't he still have to pay the income tax if he repatriates the money?

Animats 9y ago
No. Puerto Rico is part of the US.

thaumasiotes 9y ago

> I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden. Based on a couple of minutes of reading from wikipedia ( https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico ), it sounds like the federal income tax is only eliminated as to income from sources in Puerto Rico. If your income is mostly capital gains from your vast stockholdings, what's the "source"? How exactly is this working? Do you have to be invested exclusively in stocks listed in Puerto Rico? (Do those exist?) Do you have to be exclusively invested in Puerto Rico government bonds? Is his hedge fund incorporated in Puerto Rico, and that's enough?

anigbrowl 9y ago
Shell companies are your friend. You can move a lot of money around faster than the authorities can follow the paper trail in many cases. That's why some people refer to delaware as the world's biggest tax haven - Delaware is extremely friendly to corporations and it's trivially easy to set one up. So if you are skilled in the technicalities of company formation and business administration, you can make your audit trail very difficult to follow.
- thaumasiotes 9y ago
  OK, but a shell company in Delaware sounds pretty useless as a means of sourcing your income from Puerto Rico.
  - anigbrowl 9y ago
    How about I have three shell companies, and you guess which one has the real source of my income underneath it? $5 to to win $10.
    - thaumasiotes 9y ago
      At least offer $15, geez. $5 to win $10 is a money loser even when you have income under one of the shell companies. :p