In a bold move that could shake up the sunny shores of Puerto Rico, U.S. Representative Nydia Velázquez has introduced the Fair Taxation of Digital Assets in Puerto Rico Act.
U.S. Representative Nydia Velázquez has introduced a game-changing bill to reform crypto taxation in Puerto Rico.
This legislative action aims to close tax loopholes that have allowed wealthy crypto investors to enjoy a tax-break paradise on the island. By aligning Puerto Rico’s crypto taxation with U.S. mainland rules, the bill threatens to dismantle the attractive tax incentives that have drawn a flood of investors, including venture capitalists and internet personalities, to the island.
Puerto Rico is currently basking in the glow of Act 60, which offers generous exemptions that let crypto traders pay little to no local or federal taxes on their gains. Proper record-keeping is essential for investors to navigate these complex tax environments effectively.
However, critics argue that this influx of affluent investors is pushing up housing costs and failing to contribute meaningfully to the local economy. The estimated revenue loss due to these incentives could reach a staggering $4.5 billion between 2020 and 2026, raising eyebrows among those who feel the economic benefits are skewed.
As the IRS intensifies its focus on tax compliance, the shadows of scrutiny loom over Puerto Rico’s tax haven status. The bill proposes taxing capital gains from digital assets at both local and federal levels, resulting in billions lost in federal tax revenue. Investigations into the use of tax breaks may have broader implications for the global crypto tax landscape, signaling that easy money might soon be a thing of the past.
Velázquez’s proposal, if enacted, could end the party for crypto investors, potentially replacing their tax bonanza with a more balanced approach to taxation. While it may deter future investments, it also seeks to address local economic disparities, ensuring that the benefits of being a tax haven do not come at the expense of everyday Puerto Ricans.
The challenge now lies in balancing the scales of taxation while still keeping Puerto Rico attractive for investors — a task that could be as tricky as balancing a beach ball on a sunny day.
