Bobos & Wojaks

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Crypto Millionaires Moving To Puerto Rico To Avoid Tax

Suddenly, a tropical island less than four hours from the United States is overwhelmed with millionaires, all of whom are there for the same reason.

When Frances Haugen, a Facebook whistleblower, isn’t jetting around the world lobbying politicians to regulate her former business, she’s presumably living off little-taxed cryptocurrency riches in her new home of Puerto Rico.

“For the foreseeable future, I’m fine, because I did buy crypto at the right time,” Ms Haugen said in an interview with The New York Times, when asked how she’s supported herself since leaving Facebook.

Her March relocation to Puerto Rico was driven by a desire to join her “crypto buddies” on the island, as well as a health condition, according to the former Facebook executive.

Puerto Rico, an unincorporated US territory known for its beaches, rainforests, and Spanish Colonial architecture, has become a popular destination for cryptocurrency investors such as Ms Haugen in recent years, owing in large part to its position as a tax haven.

People who live in Puerto Rico for at least half of the year are excluded from paying taxes on interest, dividends, and capital gains under Act 22. This means they can profit from bitcoin and other assets without paying taxes.

Top crypto enterprises, like hedge fund Pantera Capital and NFT marketplace SuperRare, have relocated to Puerto Rico in recent years to take advantage of the favourable tax legislation.

Other crypto investors, flush with wealth during the crypto boom, have used their little-taxed riches to buy up property in San Juan with the goal of establishing a new civilization known as “Puertopia.”

Logan Paul, a YouTube star and crypto investor, also moved to the country earlier this year and has been renting a property for around $US55,000 ($A73,000) per month – a decision that Mr Paul confessed was prompted primarily by the country’s tax rules.

“In Puerto Rico you’re motivated to do more and make more money because of the implications that come with it,” Mr Paul told Time Magazine.

The territory’s lax tax regulations have also piqued the curiosity of more traditional financiers, such as famed hedge fund manager John Paulson, who considered relocating to the island for tax reasons in 2013.

While supporters of Puerto Rico’s tax breaks argue that they bring much-needed investment to an island that lags behind the mainland US in economic development, critics have slammed outsiders for driving up housing prices in what they call a modern day form of colonialism.

For Ms Haugen’s part, she gave little detail on her crypto investments and friends in The New York Times interview – and it’s unclear if she will qualify this year for Puerto Rico’s tax exemptions under Act 22, which was passed in 2012 as “The Individual Investors Act”.

The law stipulates that investors like Ms Haugen must live in Puerto Rico for 183 days out of the year in order to qualify for the exemption.

 

They’re also encouraged to show other evidence of local residency by obtaining local bank accounts, driver’s licences and voter registrations.

Since Ms Haugen moved to Puerto Rico in March and has since flown to Washington D.C. and London to meet with politicians and testify about Facebook, she may not rack up enough days on the island to quality for the exemption.

Bill Burton, a former Obama administration press secretary who is helping Ms Haugen with media relations, did not immediately respond to calls seeking comment.