Act 22 of 2012 explained

Act 22 of 2012 —also known as the Act to Promote the Relocation of Investors to Puerto Rico (Spanish; Castilian: Ley para Incentivar el Traslado de Inversionistas a Puerto Rico)— is an act enacted by the 16th Legislative Assembly of Puerto Rico that exempts local taxes on certain passive income generated by individuals that reside in Puerto Rico.[1] [2] [3]

To ignite the interest of these new investors, Act 22 provides an exemption from Puerto Rico income taxes on certain types of passive income attained or accrued after the individual establishes residency.[4]

As of March 2013, only about a dozen individuals have taken advantage of the act, although many others have expressed their interest after the media reported that billionaire John Paulson was considering to relocate to Puerto Rico.[5] [6] The report was later denied by Paulson but media coverage increased inquiries to local accountancy firms by 400% after the story broke.[7] [8] [9]

Act 22 is one of a set of economic incentives that the Government of Puerto Rico has developed for the development of the Island's economy. Additional incentives offer unique benefits to investors for sectors like manufacturing, hospitality and tourism, international insurance and banking, export services, and agriculture.[8]

Requirements[4]

Benefits[4]

The act has come under criticism. In early 2021, in the aftermath of the victory for statehood in the 2020 statehood referendum, Act 22 emerged as a stumbling-block to Puerto Rico statehood. Senate Majority leader Chuck Schumer declared opposition to a pro-statehood bill and criticized Act 22.[10]

Some claim the act was enacted to promote the displacement of native Puerto Rican citizens [11] from the island in hope of exhibiting further colonialist control over Puerto Rico.[12] Skeptics include Jeffrey Farrow, a former White House official from the Clinton administration, and John Buckley, a former tax counsel for the Democratic Party on the United States House Committee on Ways and Means, who have described the act as a way to make Puerto Rico a tax haven.[13] Congressmen Chuck Grassley (R-Iowa) and Max Baucus (D-Montana), Chairman of the United States Senate Finance Committee, have also expressed their opinion on the matter.[14] Others, however, such as José Pérez Riera and Alberto Bacó Bagué, both former Secretary of Economic Development and Commerce of Puerto Rico, and current Secretary Manuel A. Laboy Rivera,[15] see the act favorably and describe it as being a way for Puerto Rico to overcome its economic struggles and its six years long recession.[14] [16]

Notes and References

  1. 22 . 2012 . Act to Promote the Transfer of Investors to Puerto Rico . es . March 3, 2013 . dead . https://web.archive.org/web/20140514054655/http://www.oslpr.org/2009-2012/leyes/pdf/ley-22-17-Ene-2012.pdf . May 14, 2014 .
  2. Web site: The Puerto Rico Advantage—Sun, Sand and Zero Taxes . . March 28, 2013 .
  3. Web site: Income tax exemption granted to non- residents who establish domicile within a specified timeframe . . December 17, 2012 . March 28, 2013 .
  4. Web site: Act 22 – The Individual Investors Act . 2018-09-04. GEO.tax .
  5. News: Paulson Said to Explore Puerto Rico as Home With Low Tax . Katherine . Burton . March 11, 2013 . March 28, 2013 . .
  6. News: John Paulson Mulls Move To Puerto Rico For Sun, No-Tax Fun: Report . Mark . Gongloff . . March 11, 2013 . March 28, 2013 .
  7. News: Paulson Says He Has No Plans to Relocate to Puerto Rico. 2013-03-15 . Bloomberg.
  8. Web site: Puerto Rico Solutions. 2013-03-28. puertorico-solutions.com. https://web.archive.org/web/20131023060033/http://www.puertorico-solutions.com/#!portfolio/cjg9. 2013-10-23. dead.
  9. News: Hedge Fund Billionaire John Paulson Not Defecting To Puerto Rico To Dodge Taxes. 2013-03-15. 2013-03-28. Julia . La Roche . .
  10. Web site: Delgado. Jose. February 18, 2021. Charles Schumer reaffirms he will not support a pro-statehood bill for Puerto Rico. live. 2021-02-21. El Nuevo Día. https://web.archive.org/web/20210218135448/https://www.elnuevodia.com/english/news/story/charles-schumer-reaffirms-he-will-not-support-a-pro-statehood-bill-for-puerto-rico/ . 2021-02-18 .
  11. Cruz, M. D. L. M. C. (2022). Blockchain Island: A critical discourse analysis of the colonial construction of a Puerto Rican crypto utopia (dissertation). Media at London School of Economics and Political Science, London. Retrieved 07 October, 2022.
  12. Web site: Puerto Rico Export Services and New Resident Tax Incentives . March 28, 2013 . .
  13. News: This New Puerto Rican Law Makes Wealthy People Want To Move There To Avoid Taxes . Julia . La Roche . . March 11, 2013 . March 28, 2013 .
  14. News: Law 22 attracting millionaire investors to Puerto Rico . March 28, 2013 . March 28, 2013 . John . Marino . . dead . https://web.archive.org/web/20131023060028/http://www.cb.pr/prnt_ed/law-22-attracting-millionaire-investors-to-puerto-rico-8300.html . 2013-10-23 .
  15. Web site: Senado confirma a Manuel Laboy como jefe del DDEC y PRIDCO. 2018-09-04. Business Insider.
  16. Web site: DDEC Secretary Reaffirms Government Is Heading towards Puerto Rico’s Economic Upsurge. 2018-09-04. businessinpuertorico.com.

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