Gorgeous beaches, temperate climates, and friendly locals aren’t the only things drawing mainlanders to Puerto Rico.
There is also the remarkably high quality of life, far cheaper than almost anywhere else in the United States, a reduction in federal income taxes without needing to renounce U.S. citizenship, and the fact that despite Spanish being the most common language on the island, most of the population is perfectly comfortable conversing in English.
Because Puerto Rico is a legal United States territory, the relocation procedure for U.S. citizens is reasonably simple. But to maximize your experience, there are some important things to know before you make the move.
As Puerto Rico is a U.S. territory, there are no restrictions on entry for U.S. citizens—you won’t even need a passport. One of the biggest draws of Puerto Rico is its extremely generous taxation system, which qualifying residents can take advantage of under Act 60. Qualifying individuals or businesses are exempt from taxes on interest, royalties, and capital gains, and pay only a 4% corporate tax along with a number of other benefits.
However, there is a strict set of requirements that must be met before residents can make use of those benefits. In addition to being a U.S. citizen, you must live in Puerto Rico for 183 days of the tax year and have no “tax home” outside of the territory. Over the next three years, you will be expected to show you have lived in Puerto Rico for 549 days or more.
To qualify for the full benefits, residents are expected to buy and live in their primary residence in Puerto Rico, and donate at least $10,000 a year to a registered charity on the island. They must also spend no more than 90 days in the rest of the U.S. per year or make more than $3,000 in income from sources on the U.S. mainland.
The last requirement is known as the “closer ties” test, which requires an applicant to prove they have no ties to the United States or the rest of the world that are stronger than their links with Puerto Rico. The test examines various factors, including the location of an individual’s home and possessions, where their family lives, who they bank with, and where they are registered to vote.
Note that because of the generosity of these arrangements, the IRS is taking a close interest in new residents who move to the island to reduce their tax burden. Be sure to follow the residence regulations to the letter to avoid falling foul of the taxman.
Relocation for non-U.S. citizens is still possible but is much more difficult. To utilize the tax advantages of the territory, an individual must obtain a Green Card and then go through the standard rigorous United States naturalization process that involves background checks and citizenship tests.
Relocated mainland Americans tend to gravitate to the capital of San Juan, where they can experience a standard of living comparable to the continental U.S. but one that is more affordable and with a distinct culture of its own. Among the most secure and developed regions in the city is Condado, favored for its shopping centers, luxury apartment complexes, and easy access to a stunning beach strip.
For those looking for a break from the big city, there’s the popular tourist hotspot of Dorado, which is more peaceful and quiet but still has popular amenities like beach resorts and golf courses. If you want to leave the hustle and bustle of the main island, you could even choose the pristine, lesser-traveled Caribbean paradises of one of Puerto Rico’s smaller islands, such as Culebra or Vieques.
Once you have found your home and made the move, it’s time to take care of basics like finding a bank account and obtaining a driver’s license. The largest consumer bank is Banco Popular, which has many ATMs and physical branches throughout the island. To open a personal account, you will need two types of ID and proof of your Puerto Rican address. Many branches will also require your Social Security card.
Keep in mind that cash rather than credit cards is far more commonly used for smaller transactions than in the rest of the United States.
While the territory has differing levels of reciprocity arrangements with every U.S. state that allow you to exchange your regular driver’s license for one issued by the island, many expats have reported that this procedure can be quite a headache. In addition to a wide range of personal documentation, you must supply a statement of medical fitness from a local doctor. You also have to attend a mandatory drug and alcohol course.
After being battered by Hurricanes Irma and Maria in 2017 and the COVID-19 pandemic, Puerto Rico’s economic prospects are looking exceptionally bright. The Biden administration has recently announced that it will prioritize delivering the remainder of the $60 billion allocated to Congress for the island’s economic development. Some experts even say that Puerto Rico is on the way to becoming “America’s Monaco.” With the superb quality of living and lucrative tax benefits, there’s arguably never been a better time to move to Puerto Rico. If you’d like to learn more about living or investing in this island paradise, please email us at email@example.com.