US representative Nydia Velázquez (D-NY) has proposed legislation aimed at preventing investors from using US territory for Puerto Rico as a digital asset tax.
According to a 21 April Bloomberg ReportDemocratic Congress Woman Velázquez introduced “fair taxation of digital assets in the Puerto Rico Act,” a bill that would change the existing investment-friendly laws in the territory to require some investors to pay local and federal taxes on Capital gainsincluding from digital assets.
“This wave of crypto investors has not helped Puerto Rico’s recovery or strengthened the local economy,” Velázquez said in a statement to Bloomberg. “Instead, housing costs are driven, postponed the local residents and put pressure on an island where almost 40% of people live in poverty – all while costing the federal government billions in lost tax revenue.”
Puerto Rico has become an appealing tax haven for many people in the digital asset industry since 2012 when the territory began to allow exceptions under Act 20 and Law 22 of the tax incentive code, which was later consolidated as Act 60.
ACT 60 gives individual resident digital asset investors a tax exemption if they meet specific criteria. Specifically, the law applies to all individual investors who become “Puerto Rico residents” before or before December 31, 2035, provided that these individuals were not residents of Puerto Rico at any time during the ten-year period before the effective date of the law. Both US and non-American citizens can qualify according to the law, but Puerto Rico residents who are temporarily outside Puerto Rico do not qualify because they are still considered Puerto Rico inhabitants.
According to the law, these qualified “bona fide residents” are subject to a tax rate of 0% on capital, which means that no tax on capital gains has been earned from digital assetsinterest or dividend. Further benefits include a 4% tax rate for qualified companies, such as mining of digital access and blockchain services, an exception from 75% on property taxes and 50% on municipal taxes.
The tax exemption regulation has a 15-year period and has the potential to be negotiated for another fifteen years.
As declared by ‘Big Four’ Accountancy Firm Price water (PWC), The purpose of Team 60 – also known as “The Law of Individual Investors” – is to “provide incentives to individuals who have not been a resident of Puerto Rico to become residents. To encourage the transfer of such individuals to Puerto Rico, the law from Puerto Rico exembles its passive income.”
Puerto Rico Governor Jenniffer González-Colón recently doubled on the tax rules, suggests Extension of the law 60, was set to expire in 2035 until December 31, 2055.
Despite the governor’s eagerness to expand the system, rope claimed. Velazquez’s office reportedly that Puerto Rico could lose approximately $ 4.5 billion in revenue from 2020 to 2026 due to the tax incentives.
For this reason, Congress Woman’s proposed fair taxation of digital assets in the Puerto Rico Act would add a new section to the internal income code for Puerto Rico, which makes income from digital assets subject to reservations Federal tax laws.
However, the legislation is likely to amount to something other than a performative exercise of Velázquez and co-democrats to have their objections noted, as it is almost certain not to be approved by the Republican majority, increasingly pro-crypto congress.
The Senate and House of Representatives have also made it clear that they prioritize legislation And a broader regulations for digital assets in the coming months.
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