To qualify for these incentives, individuals must meet Puerto Rican residency requirements. They must be able to demonstrate a “closer connection” to Puerto Rico than to the United States. The incentives and conditions are not dissimilar to those of the Virgin Islands and other US territories.

At the core of these Puerto Rican tax incentives is Form 8898, which is a crucial form that establishes or terminates residency. Individuals must provide details about their time spent living in Puerto Rico, where their vehicles are located, income sources, voter registration, and other pieces of information that can be used to determine whether the applicant is a bona fide resident of Puerto Rico. Due to the complexity of this form and its associated proofs, individuals who wish to apply are generally recommended to seek legal advice and maintain meticulous records.

Controversy Surrounding These Incentives

Although Puerto Rico has so far provided legal ways to avoid paying income tax and other incentives, the situation is not without scrutiny. Investigation into potential abuse of these incentives is ongoing, as IRS agents in tandem with US prosecutors use a variety of methods to examine the situation, such as deploying undercover agents and examination of records. Specifically, some agents are investigating the residency requirements and question whether some individuals may have misrepresented how much time they live in Puerto Rico or the source of their income.

In addition to those who have taken advantage of these tax incentives, authorities are also investigating attorneys, accountants, and others who have promoted or facilitated participation. The IRS has multiple pending cases that may soon result in criminal charges.

Taxpayers Reminded To Follow Tax Laws

Since January 2021, the IRS-CI has been expanding its investigation into individuals who may have falsely reported their US-based income as Puerto Rican income to evade taxes. Taxpayers must be aware of their tax obligations, understand the risks of evasion or non-compliance, maintain accurate records, and provide truthful information regarding their income and taxation. Seeking professional legal advice is recommended for anyone who has offshore accounts lives abroad, or has been involved in any international business ventures.
Individuals and businesses who wish to maintain their financial stability and integrity must utilize Puerto Rico’s tax incentives appropriately and responsibly. Advice from an experienced Arizona tax attorney can be essential for taxpayers who wish to protect their interests and avoid unintentional complications in the continually changing field of tax law.

Arizona’s Leading Tax Attorney Firm Is Ready To Help You

If you have offshore accounts, are facing a tax controversy regarding your international business, or are facing scrutiny from the IRS, don’t try to face the situation alone. Call the trusted Arizona tax lawyers at Silver Law, PLC. Our attorneys use their comprehensive knowledge of tax law, experience as former IRS employees, and negotiation skills to provide aggressive representation for all of our clients. We will fight to protect your rights and interests while providing trusted legal advice. Contact our office today to schedule your free, confidential consultation and discuss your case.

Email: lchapman@silverlawplc.com
Website: taxcontroversy.com

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