Puerto Rico Residency – The Ultimate Guide
We put together this guide for property buyers considering relocating to Puerto Rico and wondering how to qualify for residency for tax purposes.
Offering a luxurious lifestyle, golden sand beaches and highly attractive tax benefits, this territory of the United States can offer residents a high quality of life and unique advantages without a requirement to renounce citizenship of the USA.
To enjoy this lifestyle and benefit from the tax incentives under Act 60-2019 (the “Puerto Rico Incentives Code”), individuals should be aware of the complex rules and the various residency requirements which now include buying property in Puerto Rico within a defined time period. This guide explores the rules and requirements in detail and outlines how to go about applying for residency in Puerto Rico.
Citizens and permanent residents of the USA enjoy the right to live in Puerto Rico in the same way that citizens of Puerto Rico may live in the mainland US. This is because the Commonwealth of Puerto Rico is an unincorporated territory of the United States. Due to the territory’s legal status, moving to Puerto Rico is considered internal migration as opposed to immigration.
To be defined as a bona fide resident of Puerto Rico, an individual must be able to demonstrate that he/she satisfies 3 key residency requirements relating to the individual’s “presence” in Puerto Rico, having a “tax home” in Puerto Rico and having “closer connections” to the territory than anywhere else.
To qualify as a resident of Puerto Rico, an individual must essentially pass 3 key tests as follows…
Firstly, an individual must be “present” in Puerto Rico for defined period. To pass this test, an individual should be able to satisfy 1 of the following conditions:
- Be present in Puerto Rico for a minimum of 183 days in the tax year.
- Spend at least 549 days in Puerto Rico during the 3-year period of the current tax year and the 2 preceding years, including at least 60 days in Puerto Rico during each tax year.
- Not be present in the USA for more than 90 days during the tax year.
- Not earn more than $3,000 in earned income in the USA during the tax year and be present in Puerto Rico for more days than in the USA.
- Have no significant connection to the USA during the tax year.
2. Tax Home
Secondly, an individual should not have a “tax home” outside of Puerto Rico.
This means that Puerto Rico should be your primary place or residence or your primary place of employment. To benefit from the tax advantages under Act 60-2019 (detailed below) an individual must purchase property in Puerto Rico within 2 years. This property must be the individual’s primary residence and not rented out.
3. Closer Connections
Thirdly, an individual should not have a “closer connection” to the USA or to a foreign country than to Puerto Rico.
Various factors such as the presence of an individual’s permanent home, family, belongings, principal bank and business in Puerto Rico, as well as the existence of professional, cultural, religious, social and political affiliations and links in Puerto Rico, may help to demonstrate a closer connection to Puerto Rico than to anywhere else.
There are many advantages to becoming a resident of Puerto Rico.
First and foremost, there are some significant tax benefits. As Puerto Rico is a part of the USA but has an independent tax system, residents of Puerto Rico pay taxes to Puerto Rico rather than to the Federal Government and the tax rates compare extremely favorably. According to Act 60-2019 (known as the “Puerto Rico Incentives Code”) which replaces various historical incentives including Acts 20 and 22, residents of Puerto Rico can enjoy a 4% flat income tax rate and freedom from taxes on capital gains, dividends, interest and royalties. Residents can also benefit from 75% exemption on property tax and construction taxes.
Superb Quality of Life
Residents of Puerto Rico can also enjoy a high quality of life with a year-round warm climate and breathtakingly beautiful surroundings. The territory boasts hundreds of miles of golden sand beaches, world-class golf courses and excellent conditions for all kinds of water sports such as scuba diving and snorkeling, surfing, kayaking and paddle boarding.
High Quality Real Estate
The territory offers some of the most luxurious real estate in the Caribbean, ranging from lavish homes overlooking the ocean to stunning contemporary beachfront condominium residences.
Proximity to the USA
Puerto Rico is easily accessible from the mainland USA with no need to show a passport when traveling from the mainland USA to Puerto Rico.
No need to Renounce US Citizenship
As the US taxes citizens on their worldwide income, some individuals have felt the need to renounce their US citizenship and move abroad to minimize their tax burden. However, in the case of Puerto Rico, all the above tax and other benefits are legally available to residents of Puerto Rico without having to renounce US citizenship.
Find out more: Invest in Puerto Rico
Would you like to find out more about how to get residency in Puerto Rico?
To explore your options in more detail, please contact 7th Heaven Properties, the Luxury Caribbean Property Specialist.
To discover homes for sale in Puerto Rico and condos for sale in Puerto Rico from the exclusive beachfront resort communities of Bahia Beach and Dorado Beach to more affordable options in Palmas del Mar, explore real estate in Puerto Rico on our website.
We look forward to helping you find your perfect property in Puerto Rico.