The Caribbean Tax Haven That’s Right In Your Backyard
When people say there is no place in the world quite like Puerto Rico, it’s not hyperbole.
Start with some Caribbean island life and all that implies (sun, surf, soft trade winds), add a dollop of laid-back Latin American culture, throw in a generous helping of U.S. mainland-style amenities, and finally, some truly remarkable tax advantages at the moment, and you have Puerto Rico. The Enchanted Isle.
For reasons that escape me, Puerto Rico rarely shows up on anyone’s list of places to retire away from the cold winters and hectic pace of the northern climes. You hear about Belize, Panama, and Portugal, but the reports never seem to make much mention of the tropical haven that is—literally—right in America’s backyard. Given that moving there, for a U.S. citizen, is almost as easy as moving to Florida or Phoenix, the omission is baffling.
Right now is a particularly interesting time to consider Puerto Rico, for a number of reasons. Firstly, the local property market has been in a serious slump for nearly 10 years. Prices are down nearly 50% from their 2006 highs. Second, since 2012, Puerto Rico has been courting mainlanders with a series of tax breaks that make it one of the most attractive tax havens on the planet for U.S. citizens. If the idea of paying zero taxes on dividends and capital gains is appealing, Puerto Rico is worth some serious thought.
The appeal of the island has not been lost on hundreds of people from the mainland in recent years. More than a thousand people, primarily high-net-worth retirees and people in the financial services sector in high-tax jurisdictions like New York and California, have moved to Puerto Rico in the last four years or so. Uncertainty, driven by headlines about the island’s budget deficit and possible appointment of a federal oversight board to manage its finances, slowed the influx slightly in the early months of 2016, but when and if the dust settles it is likely to pick back up again.
Puerto Rico’s political status has always been a matter of much debate on both the island and the mainland. Four referenda have been held on the issue, and the latest (in 2012) was the first in which a clear majority (61%) favored statehood. Puerto Rico’s legislature called on the Obama administration and the United States Congress to act on the referendum and resolutions have been introduced in both U.S. chambers, but none made it out of committee. Another vote is expected but not scheduled, so the island’s status remains in limbo.
For people who move to the island, all the back-and-forth is very relevant. If Puerto Rico were to become a state, it would no longer qualify for any territorial tax incentives. And those tax incentives are the main reason many mainlanders are considering relocating to the island.
With a population just shy of 400,000, San Juan is the largest city on the island by far. It is the cultural, economic, and political center of the territory as well. The principal neighborhoods where expats tend to congregate are Old San Juan, the touristy colonial quarter, and the beachfront neighborhoods east of there—Condado, Miramar, Ocean Park, and Isla Verde.
Old San Juan is one of the best preserved Spanish colonial quarters in the Americas, with cobblestone streets, wrought-iron balconies, ancient churches, and streets with names like Nun’s Staircase (Escalinata de las Monjas). Many of its buildings date back to the 16th and 17th centuries, and sections of it are surrounded by massive walls and forts.
For residents, the charm of the Old City can be a double-edged sword. Cruise ships call almost daily at a port on its southern edge, disgorging thousands of sunburned day-trippers who traipse around aimlessly. Maneuvering the narrow, one-way streets in a vehicle is a challenge, and parking spaces are more precious than gold. It can also be noisy, especially on weekends, and somewhat claustrophobic. A saving grace is the huge expanse of grassy fields around the castle at San Felipe, where locals go to walk, jog, picnic, fly kites, or just gawk at the stunning sunsets.
Outside of San Juan, there are several towns that have attracted a significant number of expats and English speakers.
If island life—with its warm trade winds and idyllic beaches fringed with coconut palms—calls you, then Puerto Rico is worth considering as much as any other island in the American tropics. Making the move to Puerto Rico is, in many ways, far easier than making a move to Belize or Nicaragua. But Puerto Rico is far from a carbon copy of mainland cities such as Miami or Tampa Bay. Expect at least some hassles to intrude on an otherwise tropical paradise.
But don’t be dissuaded. Anyone who has ever fantasized of living in the tropics but been leery of tearing themselves away from the amenities of the mainland United States would do well to consider Puerto Rico before some of the other exotic locales mentioned above. The hassle factor in Puerto Rico is much lower than in those places, and language barriers will be much less of an issue.
For paradise seekers who have enough resources to live solely on dividends and capital gains, Puerto Rico is—for the moment at least—a no-brainer. No other locale in the world is as friendly for those who want to spend their hard-earned money themselves… instead of handing much of it over to state and federal governments. Whether its status will remain the same for much longer is anyone’s guess, so move quickly.
Scott Norvell
