Key Takeaways
- Puerto Rico’s tax policy has attracted over 5,000 American since 2012
- IRS probing whether the investors have lied ab
Authorities in the United States, led by the Internal Revenue Service (IRS), are actively pursuing cases against wealthy Americans, hedge fund managers, and crypto traders suspected of exploiting Puerto Rico’s favorable tax regime to evade tax payments.
According to Bloomberg’s report on June 12, civil and criminal investigations are underway, and investigators are currently probing whether traders have been honest with respect to the duration of their residence on the island and their income sources. For foreigners to avail of tax benefits in the island, they are required to spend at least 183 days in Puerto Rico each year and maintain close local ties.
Commenting on the development, Attorney Carlos Ortiz, who recently spoke with a federal prosecutor, stated that the noose is tightening around potential offenders. Notably, at least two criminal investigations are reaching their conclusion, and charges of conspiracy and wire fraud are anticipated to be filed in the near future.
Since its implementation in 2012, Puerto Rico’s tax policy has attracted over 5,000 American individuals seeking to capitalize on substantial savings on federal income tax. However, investigators are now closely scrutinizing the accuracy of investors’ residency duration on the island and the sources of their income.
Bloomberg’s sources suggest that imminent charges may be filed, involving not only taxpayers but also those who facilitated, promoted, or provided legal and accounting services related to the tax program. The charges being considered range from conspiracy to wire fraud.
It is worth mentioning a previous case involving Gabriel F. Hernandez, an accountant at BDO Puerto Rico, who faced wire fraud charges relating to IRS reporting in October 2020. While that case remains unresolved, any forthcoming charges resulting from the ongoing investigations would mark the first developments since Hernandez’s situation.
In addition to individual taxpayers, more than 3,600 businesses have taken advantage of Puerto Rico’s tax incentives, enabling them to avoid paying taxes on dividends from earnings and profits. These businesses are only subject to a 4% tax on exported goods.
