Puerto Rico Act 20 / 22 Tax Incentives – How to Apply Yourself for $450.00 | Self-Help Resources

I started a Facebook Group of Act 20 / 22 members and those interested here: https://www.facebook.com/groups/1193474797381907/

UPDATES

ACT 22 SUCCESS

January 11: Submitted application online

January 19: Sent email on pre-evaluation status for application completion. Talked with staff indicating one person is in charge of prequalifying all apps.

January 21: Talked with prequalifier over phone and discovered application website was down.

January 26: Requested a manual review if the application website was still down. It was down 9:00 PM PST, January 25, but it seems to be back up now.

February 2: Called in on status update, and discovered pre-evaluation was complete. I should had received an email indicating a notarized affidavit and $750 application fees were required, but I didn’t receive that email for some reason. Mailed out via 3-Day Priority mail my notarized applications and Cashier’s checks for application fees.

February 11: Check was received by their offices and I received a detailed email describing the next steps on how my application status will proceed according to certain milestones as described below.

  • FILED: Payment has been received and my application will be forwarded to the appropriate agencies.
  • IN EVALUATION PROCESS: Background checks are conducted and evaluations are conducted on the provided documents. No specific time frame.
  • ELIGIBLE CASE: This is the final “stamp of approval” required stage passed onto the highest departments such as the Department of Treasury and The Department of Economic Development. Time frame is listed at 20 working days. This is where I’ll need to pay the one-time fee for $5,000 for Act 22.
  • APPROVED: THE DAY I’M LOOKING FORWARD TO!

February 16: Act 22 Application is now “In Evaluation Process.” Act 20 is still in “Pending Filing”

February 18: Act 20 Application is now “Filed.”

February 23: Act 20 & 22 now “In Evaluation Process.”

March 1: Act 20 & 22 “In Evaluation Process.”

March 2: I just heard through various people experienced with the process that Act 20 has been taking upwards of 6 months to complete. Since I officially “filed” February 12, that’s looking to be completed sometime in middle August which means not enough time for me to move AFTER approval, and still qualify as a bon-a-fide resident. It turns out that upon approval, the Decree is backdated to your approval date, so assuming the decree gets approved the same year, you could move in expectation of approval.

March 7: This group has been helpful. Just be wary of the people trying to “sell” you stuff. There seems to be a higher concentration here than I’m used to, but that may be because there are a lot of “Internet Marketers”: https://www.facebook.com/groups/1570113163276010/

March 9: Realizing I could’ve moved to Puerto Rico upon my file date (dumb mistake!), I’ve sought professional representation to help increase my odds of gaining approval. At least with enough certainty that I make the move earlier than I had anticipated.

Based on the Facebook group I listed, I discovered that there are three main organizations that got in from the start: BDO, PMA, & AMG. BDO is the only group that has CPAs licensed. The other groups are attorneys, so they have the advantage of having 100% attorney-client confidentiality, if that’s your thing. BDO can’t necessarily promise that, but they offer a blended rate which puts them at being cheaper overall than the attorney firms, while still offering Attorneys within BDO mixed in with CPAs.

I’m checking with my contact at BDO if he wants me to post his contact info so you can give him mad referrals! I wish I found that Facebook group at the beginning. I have no idea why I didn’t do a quick search in Facebook at the beginning. Stupid me! Oh well, you can learn from my mistake now.’

March 10: Upon some soul searching, I’m ready to make the plunge. My contact at BDO is below. The basic rationale is that there have been essentially zero cases where someone from Act 20 has been flat out denied. Even if the application doesn’t get approved until after the 2016 tax return deadline, I can still submit it as though I was approved.

Unfortunately, the Internet has not been doing Act 20 / 22 any favors with all the people trying to monetize information (only reinforcing the “scammy” feeling), and it’s taken some time for me to shake off the “feeling” of this being a scam. Seriously, a 4% tax rate seems “too good to be true!” The Facebook group helped bring an authentic and more trustworthy assurance that this is, in fact, THE REAL DEAL! Time to GET SOME!

GIOVANNI MENDEZ, ESQ.
Senior Associate
Tax Advisory Services
Tel: 787-754-3999 Ext. 2154
gmendez@bdo.com.pr

Also, since I’m going to be a Puerto Rican resident, I didn’t need to also apply for Act 22 since Act 20 allows the dividends from my company to be tax free for Puerto Rican residents. Oh well. Even if I knew that before, I’m glad I did it anyway since I’ll probably be glad I did so within the next 20 years.

March 23: Confirmed that even if my application isn’t approved this year, I can still file as though it is approved. So I ended up flying in Sunday, March 13. Moved into my house in Monte Claro, Bayamon, March 21. I’ve learned a lot, and perhaps I’ll do an updated podcast soon.

April 28: APPROVED FOR ACT 22!!! I just received the letter via email this morning. Act 20 is now listed as “Eligible Case” which is defined from one of my earlier emails as:

o   Act 20: it means that the draft of the decree has been sent out to the agencies for their determination or recommendation. It has a time frame of 20 working days, however the public policy of this administration is that no case will be approved without the recommendation of the Department of Treasury.  Once we receive the recommendations of the agencies, we send a final draft of the decree, where a team of the DDEC will evaluate your petition, this will not change the status but we call it the Final Stage. Once they understand that the case is ready for approval they send it to the Secretary of DDEC.  Once we receive it the status will change to Approved and we will contact you so that you can pick your decree or we can send it by mail.


DISCLAIMER: I AM NOT AN ATTORNEY OR CPA. I HAVE NOT CONSULTED ANY PROFESSIONALS, AND THIS IS BASED OFF RESEARCH ONLINE. NO ACTUAL EXPERIENCE. FOLLOW MY ADVICE AT YOUR OWN RISK!!!

 

SUMMARY
♦ 4% Corporate Tax Rate (ACT 20)

 

♦ 0% Tax on Dividends (ACT 22)

 

♦ “Source of Income” not from the US are exempt from US Federal Income Tax (https://www.irs.gov/taxtopics/tc901.html).

 

“Source of Income” defined: http://www.nd.gov/spo/connectnd/1099-information/irs-def.pdf

 

Pay yourself market salary for Arm’s Length Transactions

 

STEP 1 – CREATE CORPORATION

https://prcorpfiling.f1hst.com/CreationFilings/NameAvailability.aspx

Registered Agent

United Corporate, $250.00

info@unitedcorporate.com

$150 for Minimum Registration Fee

Bylaws & Minutes

 

STEP 2 – APPLY FOR EIN

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online

 

STEP 3 – APPLY FOR ACT 20 & 22

https://applications.pridco.com/

– Request Access for Company & Individual

– Go through process, hit “Save Application”

– Go Back to Main Screen

– See all documents needed to Upload

 

DOCUMENTS NEEDED
Criminal Background Check (https://oag.ca.gov/fingerprints/security) ~$50
Two Commercial Bank References
Resume
Corporate Structure
Passport
Social Security Card

Find the official list here: http://www.oeci.pr.gov/SiteCollectionDocuments/Instructions%20-%20DDEC%20Online%20Applications%20Platform.pdf
TIMEFRAMES?
ACT 20: 6 months?
ACT 22: 2 – 3 Months?
=====

GOVERNMENT LINKS
http://www.oeci.pr.gov/SiteCollectionDocuments/Instructions%20-%20DDEC%20Online%20Applications%20Platform.pdf
http://www.oeci.pr.gov/Pages/Communications.aspx
http://www.oeci.pr.gov/sworn-statement-notifications

http://estado.pr.gov/en/
http://estado.pr.gov/en/formularios-para-corporaciones/
http://estado.pr.gov/en/category/entrepeneurs/

 

TIME TO ACT NOW

http://taxfoundation.org/sites/default/files/docs/fed_individual_rate_history_nominal.pdf

http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=464%2C851.00&year1=2015&year2=1950

 

MAP OF LOCATIONS

https://www.google.com/maps/d/u/0/edit?hl=en_US&app=mp&mid=zcrmk64ro1OE.k-Uy3CYn9FiM

 

Dorado & Palmas Del Mar

 

FOR RENT

http://www.point2homes.com/US/Rental-Properties-Maps/PR/Dorado-Municipality/Dorado.html?location=Dorado%2C+PR&geopicker_type=viewport&search_mode=location&PriceMax=3%2C000&PropertyType=Homes&Bedrooms=4plus&Bathrooms=2-3&page=1&selected_view=map_view&LocationGeoId=352258&viewport=-66.30441089476972%2C18.454808840353525%2C-66.28044267501264%2C18.46640015557495&zoom=17&location_changed=&ajax=1

 

YOUTUBE LINKS

https://www.youtube.com/watch?v=AT8r0EqwYHA

 

https://www.youtube.com/watch?v=SZlTaixK-W4

 

RESTAURANTS

http://www.yelp.com/search?find_loc=san+juan,+puerto+rico&start=0&sortby=review_count&cflt=restaurants&l=g:-65.86990356445312,18.62248950625186,-66.28189086914062,18.231627019246293

 

ACT 20

http://www.portocapital.com/puerto-rico-act-20-tax-incentives-export-services-act-tax-incentives-legislations/

 

http://www.prinvestmentsummit.com/featured-speakers-pris.php

 

http://puertoricotaxincentives.com/act-20-export-services-act/

 

ACT 22

http://taxlawsolutions.net/articles/2014/PRIDCO%20Presentation%20-%20Tax%20incentives%20for%20export%20sercies%20and%20resident%20investors%20in%20Puerto%20Rico.pdf

 

http://www.portocapital.com/puerto-rico-act-22-tax-incentives-legislations-individual-investors-act/

 

OTHER LINKS

http://www.nestmann.com/articles/prtaxes.htm#.Vor_5RUrIuU

 

http://edition.cnn.com/2014/03/22/us/puerto-rico-migration-economy/

 

http://premieroffshore.com/blood-in-the-streets-offshore-tax-planning/

 

https://www.quora.com/Would-you-recommend-Act-20-22-Puerto-Rico-which-offers-100-tax-exemption-on-capital-gains-and-4-corporate-tax-to-an-individual-entrepreneur-with-an-online-business-generating-500k-1m-per-year-in-taxable-income

 

http://www.internationalman.com/articles/why-i-really-moved-to-puerto-rico-and-you-should-too

 

PALMAS DEL MAR

 

Dorado Beach, a Ritz-Carlton Reserve

Peter Schiff moved there

http://schiffgold.com/key-gold-news/cnn-money-talks-to-peter-schiff-puerto-rico-the-next-singapore/

 

http://money.cnn.com/2015/08/05/investing/puerto-rico-tax-exemptions-billionaire/

 

http://www.ritzcarlton.com/en/Properties/DoradoBeach/Information/Directions/Default.htm

 

ACT 74

http://businessinpuertorico.com/documents/ACT-74-PG.pdf

 

One thought on “Puerto Rico Act 20 / 22 Tax Incentives – How to Apply Yourself for $450.00 | Self-Help Resources”

  1. I appreciate this info as I’m now applying for Act 22. You don’t mention the hassle of all the ridiculous hoops they make you jump through with this application. Also, I’m confused by some things in this post. Your title is “How to Apply Yourself for $450,” yet it’s $750. Also, you wrote that you mailed in your notarized application with your payment, yet their application instructions state–and their staff lawyer told me–that they’d only accept an online submittal of the application (and yet only mailed payment–no personal check). Both caused me much hassle. Instead of making an easy electronic payment, or a mailed check, I had to go to an ATM (since I’m not where I have a bank account), and mess with ~forty $20 bills to go somewhere to buy a stupid money order. I ended up losing a $20 bill fumbling with them all. Then, 2 notaries refused to comply with PR’s ridiculous requirement of providing a copy of their authorization certificate, as if it has any necessary info that’s not on their seal. I finally found a guy who reluctantly provided his…which he hadn’t signed after it was mailed to him, so I hope PR doesn’t make an issue out of that. He took ~30 minutes to notarize it, asking me all sorts of questions since this was such an unusual request, and I’d spent hours trying to find a local notary who would provide their certificate. With the notarized/signed application finally in hand, I couldn’t just put it in an envelope and mail it with a check. Nooo, I had to upload it, and since their system would only allow me to submit this 7 pages as 1 document, I had to spend hours learning how to delete the original unsigned pages, and add the newly scanned signed pages to make a new 7 page PDF document and upload it. Of course, their 3rd World server didn’t allow the upload after 5 tries. I finally got it to upload the next day. Even the basic notarization was a ridiculous inconvenience…as if a notarization is going to stop a false application. Again, I’d like to know how you bypassed their requirement to upload the notarized application. This is just a taste of the hassles with this application. For instance, even though you pay them $750 to process the application and do their own background checks, they make you buy your own criminal background check as part of the application. The net worth categories that started at “less then $10 million” and went up to “over $100 million” sure made me doubt whether I should waste my time with the application. I had to talk with an accountant at the Act 22 Society to learn that you don’t have to be rich to be approved. In fact, I learned more about the application process there and elsewhere than from DDEC and OITE websites. They require a copy of a passport, yet I have no passport, and don’t want one. Their staff lawyer had to clear it with the OITE director for me to submit my driver license instead. The application requires uploading of various documents, including PR bank account proof. There is no option for not having a bank account (I’ve never even been to PR), so I had to waste a phone call (have to ask, “Habla ingles?” every time to find someone to communicate with, though I would presume that most applicants don’t speak Spanish) to ask what to do. Instead of just checking a box saying that I had no PR bank account since I didn’t live there yet, they made me compose a statement saying that I didn’t have an account. They could have stated that in the instructions. Of course, this statement required scanning and uploading. I don’t have a real office, so all this scanning and uploading of documents was a hassle for me. This is on top of the $5000 fee and the cost of moving to PR. PR also imposes an excise tax on stuff you bring, yet I couldn’t find anywhere online or by phone how much they charge for my vehicle (the main office that provides this info can’t or won’t give me the tax on my older truck, and refers to another office where they NEVER answer the phone.) or on other stuff I might like to bring. I wish you would have commented on some of this stuff. If this weren’t worth so much potential capital gains tax savings over the years of the contract, I would have given up on this 3rd World nonsense.

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