Research Case Study: The Puerto Rico Tax Haven

Cassidy H. Hanley

College of Business & Communications, Brenau University

AC 724: Corporate Taxation

Kathryn A. Yancey, CPA

June 20, 2021

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Many Americans feel as though they are over-taxed. Because of this, they often look for

ways to reduce their taxes, such as expatriating from the U.S. However, when an individual

expatriates from the U.S., they have to give up their citizenship or green card and are subject to

certain tax consequences. Therefore, some individuals may not feel like it is worth it to

expatriate from the U.S. just to reduce their federal income tax liabilities. Puerto Rico often

attracts individuals who want to reduce their taxes without the consequences of expatriating.

“U.S. citizens who become bona fide residents of Puerto Rico can maintain their U.S.

citizenship, avoid U.S. federal income tax on capital gains, including U.S.-source capital gains,

and avoid paying any income tax on interest and dividends from Puerto Rican sources” (Zefi et

al., 2021). There are multiple Internal Revenue Codes and Puerto Rican tax laws that provide

significant opportunities for tax reduction, in which certain individuals best benefit from them