An Eligible Resident Investor is afforded 100% exemption from Puerto Rico income taxes, including the alternative minimum applicable to individuals, on:
- Interest and dividends from all sources earned after becoming domiciled and before January 1, 2036, including but not limited to, interest and dividends received from local Registered Investment Companies.
- Interest, finance charges, dividends and partnerships profits earned after becoming domiciled and before January 1, 2036 from international banking entities licensed under the International Banking Center Act of Puerto Rico.
- Capital gains related to the appreciation of securities accruing after becoming domiciled in Puerto Rico and recognized before January 1, 2036.
A 5% tax rate would apply to the net long-term capital gain in connection with the appreciation of securities held before becoming domiciled in Puerto Rico and recognized (i) after 10 years of establishing such domicile but (ii) before January 1, 2036.
An Eligible Resident Investor is an individual who (i) is domiciled in Puerto Rico, (ii) was not domiciled in Puerto Rico during the 10 years prior to July 1, 2019, and (iii) becomes domiciled in Puerto Rico before December 31, 2035. For this purpose, an individual who is present in Puerto Rico for more than 183 days during a calendar year is presumed to be domiciled in Puerto Rico.
In order to benefit from the foregoing tax exemptions, the Eligible Resident Investor must apply for and obtain a tax exemption grant. The grant is in the nature of the contact between the grantee and the Government of Puerto Rico. The grant shall be effective during the exemption period set forth above.
Tax Rates for Eligible Resident Investors who are bonafide residents
| Puerto Rico Income Tax Rate |
Federal Income Tax Rate |
|
1. Capital Gains on Securities Acquired Pre-Moving |
||
| Appreciation Accrued Before Moving | ||
| Long-term1 gains a. Realized before 10th year of residency b. Realized after 10th year of residency (but before 2036 in the case of PR taxation) |
15% 5% |
15%2 / 20%3 0% |
| Appreciation Accrued After Moving | ||
| Long and short term gains (realized before 2036 in the case of PR taxation) | 0% | 0% |
2. Capital Gains on Securities Acquired Post-Moving |
||
| Long and short term gains (realized before 2036 in the case of PR taxation) | 0% | 0% |
3. Dividends |
Through 2035 | |
|
Puerto Rico source U.S source Other sources |
0% 0% 0% |
0% 15%4/ 20%5 Ordinary rates 15%6 / 20%7 |
1 More than 6-month holding period for Puerto Rico tax purpose and more than 12-month holding period for Federal tax purpose.
2 If the regular tax rate that would apply is 25% through 35%.
3 If the regular tax rate that would apply is 39.6%.
4 Qualified dividends if the regular tax rate that would apply is 25% through 35%.
5 Qualified dividends if the regular tax rate that would apply is 39.6%.
6 Qualified dividends if the regular tax rate that would apply is 25% through 35%.
7 Qualified dividends if the regular tax rate that would apply is 39.6%.
