In recent developments, US prosecutors, in collaboration with the Internal Revenue Service (IRS), are reportedly conducting investigations into wealthy crypto traders and fund managers suspected of illegally benefiting from Puerto Rico’s tax breaks. These tax breaks, introduced in 2012, have attracted over 5,000 American individuals to relocate to the island, enticed by the opportunity to save on federal income tax.
US prosecutors teamed up IRS for the investigation
According to a Bloomberg report published on June 12, US prosecutors are actively pursuing civil and criminal cases against hedge fund managers, crypto traders, and other affluent Americans. The investigations focus on potential misrepresentation of residency status and key aspects of income to exploit the tax breaks unfairly.
Not only are the individuals under scrutiny, but officials are also examining attorneys and accountants involved in marketing Puerto Rico’s tax program. At least two criminal investigations are expected to result in charges soon, with conspiracy and wire fraud being potential charges. Collaborating closely with IRS agents and Puerto Rican officials, US prosecutors are working diligently to build strong cases. The message conveyed by attorney Carlos Ortiz, who had conversations with a federal prosecutor, is that “the noose is tightening.”
While Puerto Rico offers some of the most relaxed tax benefits globally, the requirements to qualify for these advantages are stringent. To be eligible for the tax breaks, new residents must establish their residency on the island for a minimum of 183 days per year and consider it their “tax home.” However, these rigorous rules have reportedly tempted some individuals to manipulate numbers and engage in tax evasion, as lawyers familiar with the regime have revealed.
The IRS is looking into fund managers and wealthy traders
Prominent figures, such as gold investor Peter Schiff and crypto investor Michael Terpin, are among the notable residents who have relocated to Puerto Rico to take advantage of the tax benefits. Terpin, speaking at Miami’s annual Bitcoin Conference, praised Puerto Rico as the “only place that you can go and not have to pay on your global tax without renouncing U.S. citizenship.” Despite the potential audits faced by residents, Terpin expressed confidence in his meticulous record-keeping and the support of tax lawyers and CPAs.
While the tax breaks have been commended by the island’s affluent residents for attracting top fund managers and entrepreneurs, they have also faced criticism. Critics argue that the influx of low-tax “colonizers” has driven up the cost of living on the island, leading to protests against the tax program.
Under the current investigations, US prosecutors aim to uncover instances where individuals may have misrepresented their residency or income, effectively exploiting the tax benefits unlawfully. By bringing civil and criminal cases against these individuals, the authorities seek to uphold the integrity of Puerto Rico’s tax program and ensure that it is not misused for personal gain. As the investigations unfold, the actions taken by U.S. prosecutors and the IRS will be closely monitored. The outcome of these cases could potentially have significant implications for the future of Puerto Rico’s tax breaks, as well as the individuals involved in these alleged illegal activities.
