Puerto Rico was announced as Federal Opportunity Zone by Governor Rosello on April 18, 2018.**
Designated Opportunity Zone
An Opportunity Zone (OZ) is a community or region that has meet the specific criteria as an economically-distressed zone and has been designated eligible for preferential tax treatment. These opportunity zone localities have been certified by the Secretary of the U.S. Treasury.
Opportunity Zones were added to the tax code by the Tax Cuts and Jobs Act on December 22, 2017, and are an economic development incentive with the purpose of investment, business and job creation in distressed communities. Qualifying investments in OZ must be acquired after December 31, 2017.
What does this mean to Puerto Rico?
The Government of Puerto Rico expects that these incentives to inject millions of dollars of new investments into the island's economy, hoping for a significant increase in small and medium-sized businesses and the creation of employment to support these new enterprises and investments- which will have a trickle effect in the overall island's economy, culminating in a significant reduction of Federal Government economic social engineering programs.
Benefits of investing in Opportunity Zones
While contributing to the quality of life of others, investors are permitted to minimize and defer capital gain taxes while generating an ROI as high as 20%.
Investors only have to reinvest the gains instead of the entire proceeds from the sale of an asset to take advantage of the tax benefits. Gains from the sale of any capital asset – real estate, stocks and bonds, etc. – can be rolled into an Opportunity Zone investment.
The types of businesses that are eligible for Opportunity Zone benefits are more wide-ranging compared to many previous incentive programs and include investments such as residential rental property businesses, which typically pose lower risks for investors.
Therefore, one of the most practical strategies to take advantage of this tax bill is to buy older buildings in Opportunity Zones, renovate them at a reinvestment cost that is greater than or equal to the purchase price, and then manage the building as a rental property.
As such, investing into qualified projects in Puerto Rico, which is part of the U.S. and is therefore protected by the same property rights and other legal regulations as are applicable in the mainland, is now a highly strategic investment for minimizing capital gains tax for investors who plan to keep their reinvested capital within the territory.
As a U.S. territory, Puerto Rico enjoys legal and economic benefits that are not available to the neighboring Caribbean islands.
The Bonus of Investing in Puerto Rico:
- Awesome weather.
- Puerto Rico has been a popular vacation destination.
- No passport required.
- Well-educated workforce.
- Property and lifestyle options- beach, mountain, adventure, etc.
- Tax Incentives. (Read more here!)
- Puerto Rico is a Commonwealth of the US.
This article should not be regarded as offering a complete explanation of taxation and legal matters in Puerto Rico. No person, entity or corporation should rely on this article in whole or in part and readers are advised to obtain comprehensive advice in relation to their personal circumstances from a qualified professional person or firm of advisors prior to taking any action.
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