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Why Puerto Rico? Let Me Explain…
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Harry-ENM-new
I moved to Puerto Rico in mid-2016.
Not for the tax advantages (at first), but to be closer to my vacation house on Culebra (a Puerto Rican Virgin Island) and to have a high-end beach-front lifestyle for one quarter the cost of moving back to South Beach, Miami.
Puerto Ricans are U.S. citizens and have free movement to and from the U.S. The truth is that it’s always been more of a one-way street from Puerto Rico. The chart below shows the trends of net migration to the U.S. since the 1950s.
PRCitizensLeaving
Such constant outmigration hurts the Puerto Rican economy. But it gives incentives for policies that attract people and U.S. businesses from the mainland.
The pharmaceutical-oriented tax incentives from 1976 to 2006 transformed Puerto Rico by creating high-wage jobs that tripled the cost-of-living-adjusted standard of living here.
Since those were discontinued in 2006, Puerto Rico has been in a long recession that has worsened due to the destruction of Hurricane Maria.
In 2012, Puerto Rico initiated Acts 20 and 22, which offered very attractive tax incentives to financial, investment, and service businesses.
After I moved to Puerto Rico, I found out I could qualify for those tax advantages that I didn’t expect to qualify for. I finally applied for and acquired Act 20/22 status, and became a Puerto Rican resident, yet still a U.S. citizen.
Here’s a quick summary of what that involves:
  1. You don’t give up your U.S. citizenship or passport.
  2. You must physically live in Puerto Rico for six months a year just to qualify.
  3. You pay normal U.S. taxes on U.S. – or global-sourced income outside of Puerto Rico.
  4. On Puerto Rican-sourced income you pay a fair salary at their maximum rate of up to 33%, and then after that you pay 4%… That’s 4%, not 39.6% plus state income taxes. Wake up California and New York!
  5. Even better, on short-term trading and long-term capital gains you pay ZERO… This is a much greater advantage for short-term traders than even long-term investors.
  6. Early qualifiers will get grandfathered in even if this gets cut off later, so act sooner than later.
  7. Act 20 for business taxes at 4% is likely to be extended longer than the zero capital gains for short-term traders and investors under Act 22.
  8. You must be in this program for three tax years. If you move back to the U.S. before that, you must pay back all your tax savings.
The best tax advantages go to investment managers and traders, or newsletter writers and publishers like myself.
For people like me who speak around the world, but research and write here, the advantage is a bit less because the income from appearances is sourced in the U.S. and globally.
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The lifestyle in Puerto Rico has improved dramatically over the 25 years I’ve been coming down here. But the real advantage is lower costs for real estate: 60% lower on average, and as much as 75% lower on the high end.
The beach areas here are safe, even though crime is still higher than in the U.S. in the outer areas.
That also creates an advantage for retirees in the U.S. to move here as well.
Your nest-egg will go much further here while the weak economy only keeps real estate and the cost of living lower. And your income typically does not depend on the Puerto Rican economy if you are retiring here and living off your savings or
retirement plan.
There’s also a move in progress to extend similar tax advantages to wage and salary earners that move here from the U.S. I’ve heard from a few officials that it’s coming.
It’s obviously not for everyone, but I’m happy I moved here. I say more U.S. businesses should consider Act 20/22 advantages, as well as lower wages and real estate costs to export back to the U.S. more profitably.
The first step is to take a week or more vacation here and really see the island. It has a vibrant urban culture to add to the beaches, mountains, waterfalls and two Virgin Islands.
Retirees, keep Puerto Rico in mind.
For a more in-depth look at the paradoxes and attractions of Puerto Rico, check out the latest issue of 
The Leading Edge.
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Harry
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@harrydentjr

By Kathleen Peddicord, ContributorJune 23, 2016
Puerto Rico: an Ideal Retirement Haven Right in Your Backyard
This tropical getaway is easy for U.S. citizens to reach and retire to.

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Some retirees say living in San Juan, Puerto Rico, is not much different than living in a midsize city on the mainland, yet you'll find affordable housing, idyllic beaches and plenty of Spanish colonial architecture.

YOU'VE READ ABOUT Belize and Panama as ideal retirement destinations for anyone who dreams of island escape at this stage of life.

However, if warm trade winds and idyllic beaches fringed with coconut trees dominate your retirement daydreams, then your just-right "overseas" retirement haven could be right in your backyard.

Puerto Rico has been largely overlooked as an option for retiring away from the cold winters and hectic pace of northern U.S. climes, yet for many Americans, this island could be the ideal getaway that is as easy to retire to as Florida or
Phoenix.

Now is a particularly interesting time to consider Puerto Rico for two reasons. First, the local property market has been in a serious slump for nearly 10 years. Prices are down nearly 50 percent from their 2006 highs.

Second, since 2012, Puerto Rico has been courting mainlanders with a series of
tax breaks that make it one of the most attractive tax havens in the world for U.S. citizens. If the idea of paying zero taxes on dividends and capital gains is appealing, Puerto Rico is worth a look now.

Retiring to Puerto Rico can be far easier than making a move to Ecuador or Nicaragua, for example, but don't imagine Puerto Rico as a carbon copy of mainland U.S. cities such as Miami or Tampa Bay, Florida. It's not. Retiring here, you'd need to be prepared for many of the same challenges and hassles that you'd face retiring to any foreign country.

That reality, though, should not dissuade you, and, in fact, the hassle factor associated with setting yourself up as a retiree in Puerto Rico should be significantly less than in any other tropical island haven you might be considering. Language, for example, should be less of a barrier than it might be elsewhere. Spanish is the dominant language, and all dealings with officialdom need to be conducted in the native tongue, but flawless English is widely spoken, especially in the tourist areas.

Thanks to the current tax benefits of living or retiring in Puerto Rico, this island is finally attracting attention. More than a thousand Americans, primarily high-net-worth retirees and people in the financial services sector in high-tax jurisdictions including New York and California, have moved to Puerto Rico in the last four years or so.
Columbus landed on Puerto Rico in 1493 and named it San Juan Bautista, but the name never stuck. The Spanish didn't establish a firm foothold on the island until Juan Ponce de Leon, the man famous for his quest for the Fountain of Youth, founded the first settlement near what is now
San Juan in 1508.

Puerto Rico's close ties to the U.S. go back to the years immediately following the American Revolution, when trade between the Spanish colony and the States grew to the point that the former became less and less important and the latter more so. Islanders declared their independence from Spain in 1868, but it was not to last.

The U.S. formally took control of Puerto Rico in 1898 following the Spanish-American War and the Treaty of Paris. The Foraker Act of 1900 established free trade between the island and the U.S. and placed Puerto Rico under the American monetary system and tariff provision. The later Jones Act of 1917 granted American citizenship to Puerto Ricans and provided them with protection under the Bill of Rights.

During the postwar World War II period, American economic influence on the island grew tremendously, to the point that the U.S. essentially controlled the island's economy. In 1947, the American government gave Puerto Rico the right to elect its own governor, and Luis Munoz Marin was elected to the post. Six years later, the island was transformed from an American territory to a commonwealth, a status it still retains.
Commonwealth status links Puerto Rico to the U.S. through common citizenship, common defense, common currency and a common market. However, Puerto Ricans do not pay federal taxes and are denied voting representation in the U.S. Congress. Almost without exception, the same federal rules and regulations – everything from the Americans with Disabilities Act to water and air quality standards – apply to Puerto Rico as a commonwealth as to the mainland States.
Puerto Rico's political status has always been a matter of much debate on both the island and the mainland. Four referenda have been held on the issue, and the latest, in 2012, was the first in which a clear majority (61 percent) favored statehood. Puerto Rico's legislature called on the Obama administration and the U.S. Congress to act on the referendum and resolutions have been introduced in both U.S. chambers, but none made it out of committee. Another vote is expected but not scheduled, so the island's status remains in limbo.

For anyone considering moving to the island, all the back and forth is relevant. If Puerto Rico were to become a state, it would no longer qualify for territorial tax incentives.

However, you should not make the decision where to retire – to Puerto Rico or anywhere else – based solely on any associated
tax benefits.
When you consider Puerto Rico beyond its tax advantages, here are other pluses you find:

Getting to the island could not be easier.
All major U.S. carriers offer direct flights from the North American hubs, as do most of the low-cost carriers, and several European airlines offer direct flights from the continent. Further, U.S. citizens do not even need a passport to travel to Puerto Rico, only a state-issued photo ID.

The climate is typically Caribbean.
Temperatures average 82 degrees year-round, with an average minimum temperature of 67 degrees and a maximum of 85 degrees. The south part of the island is usually a few degrees warmer than the north, and temperatures in the central interior mountains are always cooler than elsewhere on the island. Rainy season stretches from April to November, and the summer months are more humid than the winter ones. Note that hurricanes are a constant threat during the late summer and early autumn, when the island receives about a quarter of its annual rainfall.

Old San Juan is one of the best-preserved Spanish-colonial quarters in the Americas. You'll find cobblestone streets, wrought-iron balconies, ancient churches and streets with names like Nun's Staircase ("Escalinata de las Monjas"). Many of the buildings date to the 16th and 17th centuries, and sections of this quarter are surrounded by massive walls and forts.

Those who call it home say living in San Juan is not much different than living in a midsize city on the mainland.
Big-box retailers are located on the outskirts in strip malls that could as easily be in Atlanta or Albuquerque. There are gyms and sports facilities, symphony and popular concerts galore, dozens of museums and several universities. Public transport (mainly buses) is not terribly good, with the exception of a new 10-mile rail system dubbed the "Tren Urbano" with 16 stations between Bayamon and Hato Rey that costs $1.50 (75 cents for seniors).

Real estate values are seriously depressed.
Prices began to drift downward in 2004 and 2005 when lending rules changed, and they went off a cliff following the 2008 crash. The market still hasn't recovered. Even in the upscale neighborhoods of San Juan, you see abandoned homes and apartment buildings, often adjacent to new ones. If Puerto Rico were a state, it would rank only behind New Jersey in terms of home foreclosures.

This can translate to good news for anyone
shopping for a home on the island today. You can buy a three-bedroom, two-bathroom home not far from the beach in San Juan that sold for $177,000 six years ago for $100,000 today, or a you can buy a home in gated communities in San Juan that sold for more than $1 million only a few years ago for $400,000.

One-bedroom condos in the heart of San Juan, with their own security and private trash collection, can go for $160,000, and three-bedroom homes go for $230,000.

It's definitely a buyer's market.