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Puerto Rico is a beautiful Caribbean island. It is an unincorporated territory of the United States. It is home to about 3.2 million people. The capital of the island is San Juan. The island is developed in status as per the Caribbean standards, but it is the poorer than the poorest city of the United States. Though Puerto Ricans have been U.S. citizens since 1917, a significant portion of the island’s population are currently living below the US-standard poverty line. The island has a mixed economy, dominated by the manufacturing sector. The service sector also plays a strong role, but agriculture has a very minimal role in the economy. In recent years, the island has become a hotspot of cryptocurrency enthusiasts. Several crypto businesspersons have flown into the island. What inspires this influx of the crypto enthusiasts is the crypto friendly tax laws the island established. Act 60 is transforming the cryptocurrency landscape of the island. The continuing transformation is expected to impact the country’s economy positively. Many see the island’s unique blend of US affiliation and tax benefits as a golden opportunity. Actually, how much liberal is this island’s crypto regulation? Definitely, it will be better than the US. Is it so? Not sure? Let’s check it.
1. Crypto Regulations in Puerto Rico: An Overview
Cryptocurrency is a hot topic in the island of Puerto Rico. Since 2017, the crypto sector in the island has been consistently improving, because many crypto enthusiasts have relocated to the island. This prime reason for this continuing improvement in the sector is the existence of Act 60, established recently in the island. The crypto community in the island has been growing consistently for the last few years. The initiatives aimed to improve the crypto sector enjoys the support of the local administration, but they do face strong criticisms as nothing much has been done so far to address the issue of the alleged issue of gentrification.
1.1. Puerto Rico Act 60: A Short Explanation
Act 60 is actually a strategy of the island to attract investment. What this act basically does is it offers tax incentives to residents. This is an updated or improved version of Act 20 and 22. The act provides generous benefits like zero tax on passive income, such as capital gains and dividends, and low corporate and income tax rates. To qualify for the benefits offered by the act, individuals must live on the island for at least three years. What makes this act extremely appealing for the crypto enthusiasts in the United States is that it provides a unique opportunity to enjoy tax savings while retaining US citizenship.
2. Crypto Regulations in Puerto Rico: What’s New
July 30, 2023: The San Juan Mercantile Bank & Trust International officially began operations, offering custody and settlement services for both fiat and digital assets. This service integration with the San Juan Mercantile Exchange enhances options for crypto traders.
July 2, 2024: Robinhood expanded its cryptocurrency services to include Puerto Rico and the US, Virgin Islands.
3. Crypto Taxation Framework in Puerto Rico Explained
Puerto Rico is literally a tax haven in every sense. Under Act 60, residents enjoy a 0% tax on crypto earnings. It does not matter whether you are a trader, crypto staking person or a crypto mining person. The source makes no difference in the tax rate you are supposed to pay. To qualify for these benefits, the one thing required is that you must become a bona fide resident of the island. Not only has the island an attractive tax environment for individuals, but also it has a friendly tax policy for corporations. The corporations operating in the island only have to pay 4% tax on their income. One thing that is important to note here is that only crypto acquired and sold while living on the island is tax-exempt. What else can a crypto entrepreneur expect from a crypto haven?
4. Crypto Mining in Puerto Rico: What You Should Know
Puerto Rico is becoming a hotspot for crypto mining. What could be the reason? Definitely, Act 60 would be the prime one. Blockchain activities, like mining, attract a minimal tax of 4%. Businesses involved in these areas can benefit from the “export service incentives.” A crypto miner in Puerto Rico pays as tax far less than what a crypto miner in the US mainland pays. Thus, Puerto Ricon crypto miners have a clear advantage over their counterparts in the US mainland. This explains why the island is slowly becoming the most sought-after destination of crypto mining businesses.
5. Timeline of Crypto Regulation in Puerto Rico
2012: Puerto Rico introduced Act 20 (Promotion of Export Services) and Act 22 (Relocation of Individual Investors) to attract investment with tax benefits.
2017: The island gained popularity among crypto investors, who were drawn by the tax incentives.
2019: Act 60 consolidated previous laws into a single Incentive Code.
2021: Many crypto-based companies and investors relocated to the island to take advantage of the favourable tax regime.
Endnote
The phrase “If you are tired of high taxes in the US, move to Puerto Rico” is gaining traction, especially among crypto enthusiasts. Act 60 has successfully attracted significant investment to the island, fostering a growing crypto community. However, it is essential to balance economic benefits with the corners of local residents, particularly issues like gentrification. The hope is that this influx of investment will lead to economic growth and improve the lives of the island’s people. If successful, Puerto Rico could become a model for how liberal crypto regulations can positively impact an economy and community.
Also Check Out: Crypto Regulations in Portugal 2024