Management of Escrowed fund for persons who are not residents of Puerto Rico.<\/li>\n<\/ul>\nTo structure an IFE family office in Puerto Rico, you\u2019ll need $550,000 in capital and a minimum of 4 employees on the island. I generally recommend you start with 5 in case you lose one. You\u2019ll also need a detailed business plan, financial statements, background information on the operators of the family office, origin of funds, and to negotiate the terms of the license with the government.<\/p>\n
The tax benefits of operating a family office from Puerto Rico are as follows:<\/p>\n
1) A 4% rate on corporate profits that\u2019s guaranteed for 20 years and can\u2019t be modified or taken away by future administrations or the U.S. government. This tax rate applies to business income generated in Puerto Rico (PR sourced income, not U.S. sourced income).<\/p>\n
2) Puerto Rico sourced income can be retained in the PR corporation tax deferred.<\/p>\n
3) Family office traders and managers, as well as family members, who move to Puerto Rico and qualify under Act 22, pay zero tax on dividends from the IFE and zero tax on capital gains earned on assets purchased after becoming a resident of Puerto Rico.<\/p>\n
To qualify for Act 22, you need to move to Puerto Rico, make it your home base, spend at least 183 days on the island, and buy a home here. Both family members and operators of the family office can benefit from Act 22.<\/p>\n
The offer from Puerto Rico is basically the reverse of that available offshore. Operators of family offices will pay standard tax rates on their salary from the business and zero on dividends and capital gains from their share of the profits. For more, see this comparison of the FEIE and Puerto Rico.<\/p>\n
4) Only Puerto Rico can offer these tax deals to American family offices.<\/p>\n
All foreign countries are treated equally under U.S. tax law. It doesn\u2019t matter whether you set up a family office in Panama or Cayman Islands, it\u2019s all the same when it comes to U.S. tax laws.<\/p>\n
Only Puerto Rico is different. Puerto Rico is U.S. territory and Puerto Rico source income is expressly exempted from U.S. taxes under Section 933 and Section 937 of the code.<\/p>\n
This all means that Puerto Rico is free to make its own tax laws. It also means that the 20 year guaranteed tax holiday can\u2019t be modified by changes in the U.S. IRS and Internal Revenue Code.<\/p>\n
I\u2019ll end by saying that operators of family offices who are licensed as IFEs, and are residents of Puerto Rico under Act 22, will pay no U.S. tax when they return to the United States or repatriate their money. As a territory, Puerto Rico offers you tax free, while offshore offers you only tax deferral.<\/p>\n
If you\u2019re running a large family office, and you would like to cut your tax rate, maximize profits, and operate under a more \u201crelaxed\u201d set of regulations within the United States, this post is for you.<\/p>\n
We offer services and structures that can help you represent your clients more efficiently\u2026for example, by converting a defined benefit plan into an IRA and moving it offshore. We can also assist with offshore UBIT blockers, captive insurance companies, master-feeder funds, and other advanced international planning tools.<\/p>\n
Note that the International Financial Entities in Puerto Rico are governed by Act 273. Some of the links above cover Act 20 and 22. Act 22 applies to the owners and managers of the 273 licensed office. Act 20 is a different tax deal available to tech companies.<\/p>\n","protected":false},"excerpt":{"rendered":"
Mark from New York asks: “Over the past year or so, I have had many colleagues of mine encouraging me to open a family office. I am a retired physician (current business owner) and most of the details as to how to open a family office are out of my scope of expertise. How do […]<\/p>\n","protected":false},"author":423,"featured_media":29785,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[9409],"tags":[29,71,258,301,302],"yst_prominent_words":[2988,2937,2033,2830,2851,3145,2990,3049,3067,2950,3142,3082,3136,2903,2809,2969,2926,2131,2995,1804],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.escapeartist.com\/wp-content\/uploads\/2017\/11\/yacht-3480913_1280.jpg","_links":{"self":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/15507"}],"collection":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/users\/423"}],"replies":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/comments?post=15507"}],"version-history":[{"count":8,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/15507\/revisions"}],"predecessor-version":[{"id":35567,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/15507\/revisions\/35567"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media\/29785"}],"wp:attachment":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media?parent=15507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/categories?post=15507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/tags?post=15507"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/yst_prominent_words?post=15507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}