One island becoming a Mecca for crypto millionaires
The US territory of Puerto Rico has become the new hot destination for cryptocurrency entrepreneurs as it has crypto-friendly policies, including huge tax breaks to those who spend at least 183 days on the island each year.
US citizens can hold on to their American passports while not having to pay any taxes on capital gains.
“That’s where all my friends are. I don’t have one friend left in New York, and maybe the pandemic accelerated this, but every single one of them has moved to Puerto Rico,” crypto entrepreneur and investor David Johnston told CNBC. He moved his family and his company to the island last year.
Johnston recalled his first impression of the small island territory: “I said, ‘Wow, okay, I get it.’” He explained that “The island has three million people … This is big enough to build a tech center.”
According to Johnston, his whole office building is filling up with start-ups and crypto companies.
The big draw of the island has reportedly been prompted by the so-called Act 60, which offers significant tax savings to qualifying residents.
In the US, investors pay as much as 37% on short-term capital gains and up to 20% on long-term gains, which applies to crypto and other assets held for over a year. One of the tax breaks under Act 60 drops that tax obligation down to zero if certain qualifications are met.
There is also a major tax incentive for business owners to set down roots in Puerto Rico. Mainland companies are subject to a 21% federal corporate tax, plus a state tax, which varies.
However, not everyone was happy about the influx of new residents to the island. Locals were annoyed by the fact that they don’t qualify for the capital gains tax exemption, which is designed for non-Puerto Ricans. They also questioned the government’s idea about the tax breaks helping to create jobs, and attract more cash into the local economy. The flood of the crypto rich into Puerto Rico has also helped to drive up real estate prices.
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