Jaime Aponte-Parsi Law Offices, P.S.C.

25/05/2026

Amendments to Puerto Rico Tax Incentives Code/Act 60-2019

Puerto Rico has extended Act 60-2019 Resident Individual Investor Program from 2035 to 2055 and has introduced a new 4% flat tax rate for future applicants.

Individuals considering relocating to Puerto Rico to enjoy the maximum benefits of the Resident Individual Investor program should file their application by by December 31, 2026.

Act 38-2026 amended Act 60 to extend the program through 2055 but introduces a 4% flat tax rate on certain investment income for applicants beginning on January 1st, 2027. The intent is to preserve the program while introducing a modest tax rate for new participants. This affects the timing of a relocation, the structure of investments, and the documentation needed to support Puerto Rico residency before key deadlines approach.

The legislation extends the Resident Individual Investor program’s expiration date from 2035 to 2055, providing greater long-term certainty for investors considering relocation to Puerto Rico.
Existing decree holders will continue to retain the benefits currently provided under their decrees.

Historically, qualifying investors could receive 0% Puerto Rico tax on interest, dividends, and post-relocation capital gains.

Under the new law for applications submitted on or after January 1, 2027, interest and dividends: will be subject to a 4% preferential income tax rate. The same rate applies to post-relocation capital gains.

The amendments to Act 60-2019 provide grandfathering for existing and near-term applicants. Investors who apply for and obtain their decree on or before December 31, 2026, will retain the current structure.

Under the current structure, interest and dividends will be 100% exempted until January 1, 2036.

Capital gains realized after becoming a bona Puerto Rico resident will also be 100% exempted if recognized before January 1, 2036.

Capital gains attributable to appreciation that occurred before relocation to Puerto Rico remain subject to special rules, including a 5% rate after a 10-year holding period in certain circumstances.

Investors submitting applications after December 31, 2026 must demonstrate that they were not a Puerto Rico resident for at least six (6) years prior to relocating to Puerto Rico.

This requirement does not apply to applications filed on or before the 2026 deadline.

Resident Individual Investors must provide evidence that they acquired Puerto Rico real estate as their primary residence within two (2) years of obtaining their decree, either individually or jointly with a spouse.

The IRS has continued to focus enforcement efforts on taxpayers claiming Puerto Rico residency and related tax benefits, including through its audit campaign targeting individuals who have relocated to the Island.

For individuals considering relocation, it is important to understand that Puerto Rico tax incentives do not eliminate U.S. federal income tax considerations. Proper planning is essential to determine how income will be sourced and taxed under U.S. federal law.

An IRS audit should not be viewed as a deterrent to relocation, but taxpayers should approach the process proactively.

Individuals relocating to Puerto Rico should ensure they maintain clear documentation supporting their Puerto Rico residency and tax reporting positions. This includes records relating to their physical presence in Puerto Rico and meeting the tax home and closer-connection tests under Section 937 of the U.S. Internal Revnue Code.

Establishing appropriate tax planning and maintaining proper documentation at the outset can significantly reduce risk in the event of an IRS inquiry.

Investors considering relocation may wish to evaluate applying before December 31, 2026 to preserve current tax benefits.
Future participants will continue to benefit from preferential tax treatment, although at a 4% rate.

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02/10/2025

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30/12/2024

In showing that an outsider can win the White House, he paved the way for Reagan and Trump.

29/12/2024

U..S. Fifth Circuit Court of Appeals reinstated the Injunction Pending Oral Arguments in March
FinCEN's January 13, 2025 filing deadline for BOIR's is on Hold

On December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit vacated the previous grant of a stay of the injunction enjoining enforcement of the Corporate Transparency Act (CTA) and the beneficial ownership reporting rule.

Consequently, the preliminary filing injunction with nationwide application originally granted by the U.S. District Court in Texas has been reactivated and is currently in effect. This is the current status and will remain in effect pending consideration of the U.S. Department of Justice's appeal by the Fifth Circuit.

In vacating the stay of the injunction, the Fifth Circuit determined “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” The Court has now scheduled oral arguments for the case in late March 2025.

We are expecting FinCEN to confirm that reporting companies will not be required to file beneficial ownership reports while the injunction remains in effect.

January 13, 2025 will not be the filing deadline for reporting companies created or registered prior to 2024.)

Our law firm will continue to monitor developments in this matter, which remains in flux.

26/12/2024

Injunction Lifted – FinCEN BOI Report

We recently published a legal update informing of the a nationwide preliminary injunction in a federal district case in Texas which suspended enforcement of the Corporate Transparency Act (“CTA”) beneficial ownership information (BOI) reporting requirements applicable to certain corporations, limited liability companies and other entities that are either created or registered to do business in the United States by filing a formation document with a secretary of state or similar office under the law of a State, including Puerto Rico (“Reporting Companies”).

The nationwide preliminary injunction paused all BOI related compliance deadlines.

On December 23, 2024, the Fifth Circuit Court of Appeals lifted the injunction previously granted by the federal district court, making the appellate court’s ruling the governing authority on the CTA’s applicability for the time being.

The Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued an extension to the filing date for Reporting Companies.

FinCEN indicated that Reporting Companies created or registered prior to January 1, 2024 must file their BOI Reports by January 13, 2025 as well as other filing extensions for entities created or registered in 2024.

Reporting Companies created or registered on or after January 1, 2025 will have 30 calendar days to file their BOI Reports.

Unless and until the US Supreme Court weighs in, BOI Reports are required to be filed by January 13, 2025.

05/12/2024

COURT HALTS BOI REPORTING

A federal district court, finding that the Corporate Transparency Act (CTA) is likely unconstitutional, issued an order Tuesday prohibiting the enforcement of the CTA and the beneficial ownership information (BOI) reporting rule in the CTA’s accompanying regulations.

The injunction, which according to the court should apply nationally, was issued in Texas Top Cop Shop, Inc. vs. Garland, No. 4:24-CV-478 (E.D. Texas 12/3/24).

Under the injunction, the CTA and the BOI reporting rule cannot be enforced, and reporting companies need not comply with the CTA’s Jan. 1, 2025, BOI reporting deadline pending a further order of the court.

The Financial Crimes Enforcement Network (FinCEN), which enforces the CTA, is reviewing the order, a spokesperson said Wednesday, pointing out that other courts have denied similar requests. The Justice Department did not immediately respond to a question about plans to appeal.

Under the injunction, FinCEN is barred from enforcing BOI filing requirements while the case is pending. Best practices dictate that at a minimum those assisting clients with BOI report filings gather the required information from the clients and are prepared to file the BOI report if the injunction is lifted. While it is unlikely that the injunction will be lifted prior to the final outcome of the proceedings, we advise being prepared in the event that there is a reversal.

Constitutional issues

The court, calling the CTA "quasi-Orwellian," found that the legislation "is likely unconstitutional as outside of Congress's power." It further found that "because the reporting rule implements the CTA, it likely is unconstitutional for the same reasons."

The government argued that Congress has the power to enact the CTA under the Commerce Clause and under the Necessary and Proper Clause.

Regarding the Commerce Clause, the court stated, "The CTA is a law enforcement tool — not an instrument calibrated to protect commerce; an exercise of police power, rather than a regulation of an activity which might impair commerce among the several states. This the Commerce Clause will not tolerate."

The government also claimed that Congress had the authority to pass the CTA because of its broad power under the Necessary and Proper Clause to enact legislation for the regulation of foreign affairs and pertaining to national security.

The court disagreed, saying, "The CTA, by its very language, does not regulate any issue of foreign affairs. It regulates a domestic issue: anonymous existence of companies registered to do business in a U.S. state and their potential conduct."

Scope of order

The largest plaintiff in the case is the National Federation of Independent Business (NFIB), which has about 300,000 members. The government argued that if the court enjoined the CTA and reporting rule to cover those members, the effect would be a nationwide injunction. The court agreed with the government's point and noted the controversy around nationwide injunctions. However, the court concluded that, given the extent of the constitutional violation shown by the plaintiffs, the injunction should apply nationwide.

Background

Under the CTA, P.L. 116-283, which Congress passed in 2021 as an anti-money-laundering initiative, reporting companies must disclose the identity and information about beneficial owners of the entities. For new entities incorporated after Jan. 1, 2024, reporting companies must also disclose the identity of "applicants" — defined as any individual who files an application to form a corporation, limited liability company, or other similar entity.

Willful violations are punishable by a fine of $591 a day, up to $10,000, and two years in prison with similarly serious penalties for unauthorized disclosure.

If the government appeals, the case would next go to the Fifth Circuit Court of Appeals. The preliminary injunction likely would remain in effect through the appeal process or until the court issues another order, she said.

We understand, as expressed by various sources, that the injunction is applicable nationwide to all small businesses. While there is still no formal guidance from FinCEN, if this injunction is applicable as we believe, many small businesses would receive the much-needed BOI reporting relief.

Todd McCracken, the president and CEO of the National Small Business Association (NSBA), the main plaintiff in an Alabama case where the judge declared the CTA unconstitutional, applauded the decision in a post on the NSBA site. It is “a huge relief to the millions of small business owners across the country who were facing a wildly complex regulatory regime,” along with fines and prison time, he said.

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26/04/2024

We are happy to announce to all of our clients that our law firm has joined the LawPay platform, and our invoices may now be paid online by credit card or e-check.

The following link will be incorporated to all our invoices: https://secure.lawpay.com/pages/jaimeaponteparsilawofficespsc/operating.

Thank you all for allowing us to serve your legal needs in Puerto Rico.

Best regards to all,

Jaime Aponte-Parsi

21/10/2023

21/10/2023

A balanced approach to the situation. Unlike Harvard or UPenn.

13/05/2023

To all of our clients, colleagues and friends;

Effective on June 1st, 2023, our law offices will relocate to 250 Ponce de León Avenue, San Juan, Puerto Rico 00918. Just steps away from our current offices in the Hato Rey financial district. Our telephone numbers and e-mail will remain the same.