Puerto Rico, a beautiful Caribbean island and U.S. territory, is home to about 3.2 million people. Its capital, San Juan, is a vibrant city reflecting the island’s rich culture. Although developed compared to other Caribbean islands, Puerto Rico remains poorer than the poorest city in the U.S. While Puerto Ricans have been U.S. citizens since 1917, many still live below the U.S. poverty line. The island’s economy is diverse, with a strong manufacturing sector and a growing service industry, but agriculture plays a minor role.
Recently, Puerto Rico has attracted many cryptocurrency enthusiasts due to its crypto-friendly tax laws. Act 60, in particular, is reshaping the island’s crypto landscape and promises significant economic benefits.
But how liberal are these crypto regulations compared to the U.S.? Let’s explore.
1. Crypto Regulations in Puerto Rico: An Overview
Cryptocurrency is a hot topic in Puerto Rico. Since 2017, the crypto sector has been growing steadily, driven by enthusiasts relocating to the island. The key driver of this growth is Act 60, a law designed to attract investment with attractive tax incentives. The local administration supports these initiatives, though there is criticism for not adequately addressing gentrification concerns.
1.1. Puerto Rico Act 60: A Short Explanation
Act 60 is a strategic move to draw investment to Puerto Rico. This law offers substantial tax incentives to residents, updating and improving upon previous Acts 20 and 22. Benefits include zero tax on passive income such as capital gains and dividends, and low corporate and income tax rates. To qualify, individuals must reside on the island for at least three years. This act is particularly appealing to U.S. crypto enthusiasts, offering significant tax savings while retaining U.S. citizenship.
2. What’s New in Puerto Rico’s Crypto Regulations?
July 2, 2024: Robinhood expanded its cryptocurrency services to include Puerto Rico and the U.S. Virgin Islands.
July 30, 2023: The San Juan Mercantile Bank & Trust International began operations, providing custody and settlement services for both fiat and digital assets, enhancing options for crypto traders through integration with the San Juan Mercantile Exchange.
3. Crypto Taxation Framework in Puerto Rico Explained
Puerto Rico is a tax haven, especially under Act 60, which offers a 0% tax rate on crypto earnings, whether from trading, staking, or mining. To enjoy these benefits, one must become a bona fide resident of the island. Additionally, corporations pay only a 4% tax on their income. However, only crypto acquired and sold while residing in Puerto Rico is tax-exempt.
This tax-friendly environment makes Puerto Rico a highly attractive destination for crypto entrepreneurs.
4. Crypto Mining in Puerto Rico: What You Should Know
Puerto Rico is becoming a prime location for crypto mining, largely due to Act 60. Blockchain activities, such as mining, are subject to minimal tax, and businesses involved can benefit from export service incentives. This results in significantly lower taxes for Puerto Rican crypto miners compared to their U.S. mainland counterparts, making the island a favored spot for mining businesses.
5. Timeline of Crypto Regulation in Puerto Rico
2021: Many crypto-based companies and investors relocated to the island to take advantage of the favorable tax regime.
2019: Act 60 consolidated previous laws into a single Incentive Code.
2017: The island gained popularity among crypto investors, who were drawn by the tax incentives.
2012: Puerto Rico introduced Act 20 (Promotion of Export Services) and Act 22 (Relocation of Individual Investors) to attract investment with tax benefits.
Endnote
The saying “If you are tired of high taxes in the U.S., move to Puerto Rico” is becoming popular among crypto enthusiasts. Act 60 has successfully attracted significant investment, fostering a growing crypto community. However, it’s crucial to balance economic benefits with the concerns of local residents, particularly regarding gentrification.
If managed well, this influx of investment could lead to substantial economic growth and improved living conditions for the island’s people, positioning Puerto Rico as a model for how liberal crypto regulations can positively impact an economy and community.
Also Check Out: Crypto Regulations in Portugal 2024
