tl;dr
U.S. Representative Nydia Velázquez has introduced the "Fair Taxation of Digital Assets in Puerto Rico Act" to end the use of Puerto Rico as a tax haven for digital asset investors. The legislation aims to require these investors to pay local and federal taxes on capital gains from digital assets, c...
U.S. Representative Nydia Velázquez has introduced the "Fair Taxation of Digital Assets in Puerto Rico Act," aiming to end Puerto Rico’s tax exemptions on capital gains from digital assets. The legislation targets the use of Puerto Rico as a crypto tax haven, requiring investors to pay both local and federal taxes on these gains, counteracting current exemptions under Puerto Rico’s Act 60.
Act 60 provides substantial tax benefits to new residents, including a 0% tax on capital gains, as well as reduced corporate and property taxes. It was designed to attract investors and promote economic growth but has been criticized for driving up housing costs, displacing local residents, and contributing to significant federal tax revenue losses—estimated at $4.5 billion between 2020 and 2026.
Puerto Rico Governor Jenniffer González-Colón supports extending Act 60 until 2055, but Velázquez’s proposed bill would override these incentives by subjecting digital asset income to federal tax laws. However, political opposition, particularly from the Republican-led Congress focused on stablecoin legislation and broader digital asset regulation, makes the bill’s passage unlikely.
Act 60, also known as "The Individual Investors Act," exempts qualifying ‘bona fide residents’ from Puerto Rico income tax on passive income like capital gains, dividends, and interest. It also offers a 4% corporate tax rate for eligible businesses such as crypto mining and blockchain services and significant property and municipal tax exemptions.
Velázquez argues that the current tax incentive scheme has not benefited Puerto Rico’s broader economy and instead has created socioeconomic pressures amid nearly 40% poverty levels on the island. The debate highlights the tension between fostering a crypto-friendly environment and ensuring equitable tax revenue distribution.
As the U.S. Congress shifts its focus to regulating stablecoins and establishing wider digital asset frameworks, the future of Puerto Rico’s tax incentives remains uncertain. This legislative effort underscores the ongoing struggle to balance innovation, economic recovery, and tax fairness in the evolving digital asset landscape.