Puerto Rico, Real Estate Investment Guide, 2023

Puerto Rico offers a unique opportunity for developers, contractors, and investors seeking U.S. domiciled assets with robust growth potential and tax efficiency. Puerto Rico is proportionally the largest opportunity zone in the United States, with over 98 percent of the Island being designated as such by the Tax Cuts and Jobs Act of 2017. Puerto Rico also offers tax incentives for businesses and individuals, all of which have been consolidated in the recently enacted “Incentives Code of Puerto Rico” or Act 60-2019, as amended (the “Incentives Code”) which have already spurred economic development on the Island. In addition, Public-Private Partnerships present a unique opportunity for collaboration in the Island’s development in the immediate future.

From a residential perspective, Puerto Rico is a unique domicile given the exceptional exemptions on property taxes. The United States is one of the few countries on earth that taxes its citizens regardless of where they reside; however, as a U.S. commonwealth, Puerto Rican citizens are in general exempt from U.S. federal income taxes while retaining their U.S. citizenship and the legal protection it provides. It is important to note that to be exempted from the payment of U.S. federal income taxes, Puerto Rico must be the primary place of residence, requiring a minimum of 183 days of residency annually, in addition to satisfying other residency requirements established by U.S. law and regulations. Furthermore, Puerto Rico does not have an estate and gift tax.

Finally, U.S. citizens that become bona fide residents of Puerto Rico are not required to pay the U.S. 23.8 percent exit tax of unrealized capital gains.