This New Puerto Rican Law Makes Wealthy People Want To Move There To Avoid Taxes

Billionaire hedge funder John Paulson, who famously bet against the subprime housing market, is reportedly weighing a move to Puerto Rico to take advantage of a new tax law there, Bloomberg News reported citing unnamed sources familiar with his plans.

According to Bloomberg News, the new law makes it so new residents pay no local or U.S. federal taxes on capital gains.

The law firm of Adsuar Muniz Goyco Seda & Perez-Ochoa has a breakdown of the new tax law.

On January 17, 2012, Puerto Rico enacted Act 22 (a.k.a. "The Act to Promote the Transfer of Investors to Puerto Rico").

According to AMGPR Law, the basic premise of the act is to incentivize people who are not already residents of Puerto Rico to become residents.

To incentivize them, the act exempts these individuals who become residents from income tax on their interest and dividend income and certain long term capital gains from the sale or exchange of securities, the newsletter states.

The idea behind the act is that by having these individuals become residents it will help Puerto Rico's economy through real estate investments and consumption of their local products/services.

In order to qualify, individuals cannot have been residents of Puerto Rico during the last 15 years. They also must become residents before December 31, 2035. Both U.S. and non-U.S. residents apply, the report said.

So far, about 10 wealthy individuals, including some hedge fund managers, have taken advantage of this new law in Puerto Rico, Bloomberg reported.