Establishing PR residency can result in tax free gains from positions entered after a Act 22 decree is granted and the person has met residency requirements for a full tax year.
Generally, a bona-fide resident of Puerto Rico is a person who (1) is present for at least 183 days during the taxable year (2) does not have a tax home outside Puerto Rico during the taxable year (3) does not have a closer connection to the United States or a foreign country than to Puerto Rico.
Taking these gains after establishing PR residency will be subject to preferential PR income tax rates. If the gain is taken within 10 years of established PR residency it will be taxed at the income tax rate for capital gains in effect the year it is taken (currently 10%). If the gain is taken after 10 years the rate is 5%. US residents moving to PR will still be subject to US taxes on any non-PR built-in gain taken within 10 years of moving. These PR taxes are allowed as a credit against US federal taxes. So essentially you pay the US federal taxes. The only way to escape US federal income taxes on open coin trades existing before PR residency is to close the trade after 10 years of PR residency.
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