Agents of the Internal Revenue Service as well as other United States prosecutors are preparing themselves to build cases against individuals that have been illegally taking advantage of tax breaks in Puerto Rico. These agents are gathering all the information they need in order to build both criminal and civil cases against these certain people that are breaking the tax law.
Overview
For quite some time now, the island of Puerto Rico has been able to attract hedge fund managers, crypto traders, and other wealthy Americans by offering tax incentives that can be considered quite eye-catching. However, investigators are becoming more skeptical about how much time these individuals actually spend in Puerto Rico, and if their source of income is legitimate.
Promotion of Tax Program
The Americans that illegally took advantage of this tax program are not the only ones being looked into. Investigations are also expected to be launched against the attorneys, accountants, and other professionals that wrongly promoted the program. According to anonymous sources that have close ties to the situation, there are at least two criminal investigations involving U.S. attorneys that could result in criminal charges soon.
Tax Program Breakdown
Since the program was introduced in 2012, thousands of citizens from the United States are able to legally qualify for incentives that allow them to legally avoid paying income tax, taxes on dividends earned, taxes on interest, and taxes on capital gains. Additionally, thousands of U.S. businesses with ties to Puerto Rico avoid paying taxes on dividends from earnings and profits. The businesses also pay a small 4% tax for export services.
Rules Not Followed
There are several U.S. lawyers that are very familiar with this tax program, and many say that the requirements to be able to qualify for these incentives are not secure enough, and ultimately allow people to cheat and take advantage of this program. The program requires eligible U.S. taxpayers to reside in Puerto Rico for at least 183 days. They must also show proof that they have “closer ties” to the island than they do to the United States. According to investigators, it is very easy to bend the truth when it comes to these requirements.
Asking More Questions
More questions have been added to Form 8898 by investigators. Form 8998 must be filled out if taxpayers begin or end a permanent residency in Puerto Rico, or other U.S. territories. The new questions added include; How many days were you present in the territory and the U.S.? Where was your principal permanent home? Where was your automobile located? Where were you registered to vote? Where did you derive the majority of your income?
Wrap Up
It is important to note that many Americans follow this tax program to a tee and do not break any rules. Michael Terpin is someone who is prominent in the crypto industry and is very open about how he moved to Puerto Rico to take advantage of the tax program. “I didn’t want to pay capital gains tax to the IRS on my Bitcoin. Puerto Rico is the only place that you can go and not have to pay on your global tax without renouncing” U.S. citizenship,” he said.