Even if he is found wrong, provided section 1256 (60/40 tax regime) still works for puerto rican residents, it could still potentially be a type of deal for futures/fx traders, no (13.2% vs. 31.64%)? Can you ask him about that as well?
Here's the legal citation below for "all" capital gains. Plus, futures trading is capital gains income so 100% should be excluded from PR and US tax. I have the Spanish version of the amendment (Law 138 of 2012). Article 3 of Law 138 amends Article 5 of Act 22 to provide exemption to the âtotalidadâ (which means 100%) of the capital gains. For other questions, let's all ask Mr. Hernandez of BDO PR on our Webinar tomorrow. https://www1.gotomeeting.com/register/154480465
Here is the amendment Law 138 of 2012: http://www.lexjuris.com/lexlex/Leyes2012/lexl2012138.htm So, it is confirmed that the newly defined Article 3 of law 138 to amend article 5 to act 22, completely overwrites all of the former Article 4 of Act 22, which specifically only mentioned long-term capital gains, therefore short-term gains are exempt now too (including the exemption of the taxation of profits from short-term capital gains made outside of Puerto Rico)? The statute was originally in Article 4: http://www.lexjuris.com/lexlex/Leyes2012/lexl2012022.htm http://unarealty.com/wp-content/uploads/2014/02/Act-22-English.pdf Also, will you be providing a recording of the webinar, maybe via youtube or some other host?
Yes and yes. Recording on our Webinar page after event. Try to join us to ask your questions to Hernandez and Leeds. Mr. Hernandez is filing many tax returns based on 100% exemption of all capital gains.
Do the trades actually have to be made in puerto rico to qualify for the exemption? What if your main trading office is based in Puerto Rico, but you're trading using cloud hosting with a service physically located in Europe or the continental US?
No to first question, and fine to second question. But if you originate trades from an office in the U.S., including a 2nd home office, that could source those trades in the U.S. We cover this all really nicely in our Webinar recording today. One of our best with great guest panelists. Recording here http://tinyurl.com/p28x4yq
So, if you had a quant hedge fund, and the trading office was based out of puerto rico, but say, risk management and statistical research were handled by american offices, and all actual trades were conducted on cloud servers hosted in Europe and the US, it would be exempt from capital gains taxation? Also, how about the exit tax? Could someone establish residency in puerto rico, and then liquidate all of ones holdings at the 10% Capital Gains tax rate (instead of 23.8%), then renounce US citizenship with no exit tax?
See first answer above. PR is not expatriation. Expatriation as PR resident is beyond scope of our current content so not sure. Probably same toll charge on MTM expat tax.
Alright, so offshore hosting for an automated trading system is o.k., it's only an issue if actual trades are entered outside of puerto rico on a discretionary basis, correct? Since the exit tax is based on unrealized capital gains, and provided all gains were realized in puerto rico and liquidated prior to expatriation, it shouldn't be subject to such a tax, no? And there are no requirements (net worth or otherwise) to be eligible for the tax treaty other than filling out the form to apply for act 22 status and becoming a resident, other than not committing a felony, so as to not pass the background check? Correct?