Act 22 of 2012 —also known as the Act to Promote the Relocation of Investors to Puerto Rico ( es, Ley para Incentivar el Traslado de Inversionistas a Puerto Rico)— is an act enacted by the

16th Legislative Assembly of Puerto Rico The 16th Legislative Assembly of Puerto Rico will meet from January 2, 2009, to January 1, 2013. All members of the House of Representatives of Puerto Rico, House of Representatives and the Senate of Puerto Rico, Senate were elected in the Puerto R ...

that exempts local taxes on certain

passive income Passive income is unearned income that is acquired automatically with minimal labor to earn or maintain. It is often combined with another source of income, such as a side job. In the United States, the IRS divides income into three categories ...

generated by individuals that reside in

Puerto Rico Puerto Rico (; abbreviated PR; tnq, Boriken, ''Borinquen''), officially the Commonwealth of Puerto Rico ( es, link=yes, Estado Libre Asociado de Puerto Rico, lit=Free Associated State of Puerto Rico), is a Caribbean island and unincorporated ...

. To ignite the interest of these new investors, Act 22 provides an exemption from Puerto Rico income taxes on certain types of

attained or accrued after the individual establishes residency. As of March 2013 only about a dozen individuals have taken advantage of the act, although many others have expressed their interest after the media reported that billionaire

John Paulson John Alfred Paulson (born December 14, 1955) is an American billionaire hedge fund manager. He leads Paulson & Co., a New York-based investment management firm he founded in 1994. He has been called "one of the most prominent names in high fina ...

was considering to relocate to Puerto Rico. The report was later denied by Paulson but media coverage increased inquiries to local accountancy firms by 400% after the story broke. Act 22 is one of a set of economic incentives that the Government of Puerto Rico has developed for the development of the Island's economy. Additional incentives offer unique benefits to investors for sectors like manufacturing, hospitality and tourism, international insurance and banking, export services, and agriculture. Requirements Benefits * 0% tax on: Dividend and Interest Income, short-and-Long Term Capital Gains for New Puerto Rico Residents, and on Federal Taxes on Puerto Rico Sourced Income. * Tax Savings on investment portfolio returns. * Tax Decree valid until 2036. The act has come under criticism. In early 2021, in the aftermath of the victory for statehood in the 2020 statehood referendum, Act 22 emerged as a stumbling-block to Puerto Rico statehood.

Senate Majority leader The positions of majority leader and minority leader are held by two United States senators and members of the party leadership of the United States Senate. They serve as the chief spokespersons for their respective political parties holding t ...

Chuck Schumer Charles Ellis Schumer ( ; born November 23, 1950) is an American politician serving as Senate Majority Leader since January 20, 2021. A member of the Democratic Party, Schumer is in his fourth Senate term, having held his seat since 1999, an ...

declared opposition to a pro-statehood bill and criticized Act 22. Some claim the act was enacted to promote the

displacement Displacement may refer to: Physical sciences Mathematics and Physics * Displacement (geometry), is the difference between the final and initial position of a point trajectory (for instance, the center of mass of a moving object). The actual path ...

of Native Puerto Rican Citizens from the island in hope of exhibiting further colonialist control over Puerto Rico. Skeptics include Jeffrey Farrow, a former White House official from the Clinton administration, and John Buckley, a former tax counsel for the

Democratic Party Democratic Party most often refers to: *Democratic Party (United States) Democratic Party and similar terms may also refer to: Active parties Africa *Botswana Democratic Party *Democratic Party of Equatorial Guinea *Gabonese Democratic Party *Demo ...

on the

United States House Committee on Ways and Means The Committee on Ways and Means is the chief tax-writing committee of the United States House of Representatives. The committee has jurisdiction over all taxation, tariffs, and other revenue-raising measures, as well as a number of other progra ...

, who have described the act as a way to make Puerto Rico a

tax haven A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

. Congressmen

Chuck Grassley Charles Ernest Grassley (born September 17, 1933) is an American politician serving as the president pro tempore emeritus of the United States Senate, and the senior United States senator from Iowa, having held the seat since 1981. In 2022, h ...

(R-Iowa) and

Max Baucus Maxwell Sieben Baucus ( Enke; born December 11, 1941) is an American politician who served as a United States senator from Montana from 1978 to 2014. A member of the Democratic Party, he was a U.S. senator for over 35 years, making him the long ...

(D-Montana), Chairman of the

United States Senate Finance Committee The United States Senate Committee on Finance (or, less formally, Senate Finance Committee) is a standing committee of the United States Senate. The Committee concerns itself with matters relating to taxation and other revenue measures generall ...

, have also expressed their opinion on the matter. Others, however, such as José Pérez Riera and Alberto Bacó Bagué, both former Secretary of Economic Development and Commerce of Puerto Rico, and current Secretary Manuel A. Laboy Rivera, see the act favorably and describe it as being a way for Puerto Rico to overcome its economic struggles and its six years long recession.

References

{{reflist, 30em Puerto Rican law Taxation in Puerto Rico