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Bitcoin Millionaires Are Flocking To This North American Tax Haven. But What Do The Locals Think?

Bitcoin has made its own fair share of millionaires and with the recent bull rally, there is no doubt that this number went up drastically. This has led to a number of issues of investors who have made their money off the digital asset, the main one being taxes. A lot of these millionaires have begun to flee to places with less strict tax laws, as well as better weather conditions.

Bitcoin Millionaires Flock To Puerto Rico

A recent report from CNBC documents the movements of bitcoin millionaires towards Puerto Rico and its beautiful islands. The subject of the report, 36-year-old crypto entrepreneur and investor David Johnson, outlines why he moved himself and his entire family to the North American country. For the entrepreneur, the tropical paradise was a big push, as well as the tax breaks offered to those who spend at least 183 days on the island.

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Johnson also noted that the decision to move was also predicated on the fact that his friends had all moved to the same destination. The 36-year-old who lived in New York before the move said there weren’t any of his friends left in what is said to be one of the most expensive cities in the world as they had all moved to Puerto Rico.

“That’s where all my friends are. I don’t have one friend left in New York, and maybe the pandemic accelerated this, but every single one of them has moved to Puerto Rico,” Johnson told CNBC.

In addition to offering tax breaks to those who spend a significant amount on the island, residents are also allowed to retain their American passports.

Locals Not Feeling The Love

Puerto Rican locals are not exactly happy about seeing the move to the tropical paradise. This has less to do with the people coming in and more to do with the fact that the locals themselves do not qualify for the tax exemptions that these non-Puerto Ricans enjoy.

Residents like Johnson who move in from other American states after making their millions with bitcoin and crypto do not have to pay capital gains on their earnings. However, Puerto Rican citizens are having to pay up to 15% long-term capital gains tax.

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This disparity between locals and non-locals has obviously now been the source of tension between the two groups. These tax breaks which were meant to bring more jobs and investors into the region are now being utilized by residents who are trying to get out of paying capital gains tax.

Additionally, the influx of new wealthy residents is causing property costs to surge. Diaz Fournier of Luxury Collection Real Estate told CNBC that the increased demand has led to prices not seen before. “I’ve been tracking the markets for several years, and I was not expecting this,” Fournier said. “You have properties in Dorado Beach that have been sold for more than $20 million.”

BTC falls to $41K | Source: BTCUSD on TradingView.com
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Puerto Rico To Become Cryptocurrency Capital Due To Favorable Tax Laws

One of the controversial topics in recent times is the payment of tax on cryptocurrency gains. In the USA, the IRS termed virtual currencies as property which means that holders will pay taxes like holders of fundamental properties or stocks.

The agency even sent a subpoena to many centralized cryptocurrency exchanges to give up the information of non-compliant taxpayers.

Even though many people in the cryptocurrency community frown against such taxes, the government is bent on ensuring compliance. Presently, non-compliance to the crypto tax payment requirement attracts legal action. So, it is not surprising that cryptocurrency investors seek a tax-free state to operate without limits.

Puerto Rico Becomes Tax Haven For Investors

As the United States clamped down on non-compliant citizens, the top affluent crypto investors moved to Puerto Rico to avoid taxes. The territory, though in the USA, is not charging federal income tax on crypto gains.

The cryptocurrency market is down in red zone | Source: Crypto Total Market Cap on TradingView.com

According to its local law Act 22, residents of Puerto Rico are exempted from paying taxes on capital gains, interests and dividends. So, people are free to keep all their profits to themselves at least for six months.

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Many people were not aware of this provision until Frances Haugen let the cat out of the bag. The whistleblower moved to the territory a few months back and disclosed this great news to the community. The Act has been in play for a long time, but many people were unaware of it.

Following Haugen’s move, another media mogul, Logan Paul, moved to Puerto Rico and occupied a mansion on the island. When our sources asked him for a reason, he pointed out that the tax exemption is part of it.

Cryptocurrency Businesses Move To Puerto Rico

Apart from these individual players, some businesses have left their location to move to the island. For instance, Pantera Capital –a  hedge fund – is now operating on the island.

Also, SuperRare, an NFT marketplace previously operating in Silicon Valley, has moved to the island as well. We also gathered that another hedge fund mogul John Paulson is now living in Puerto Rico.

Due to this, the Blockchain Trade Association in the Island plans for its first Blockchain week, which will come in December his year. This program aims to drive more people and businesses to move to the island. With all these moves, it’s not surprising that Puerto Rico’s economic growth is taking a new level.

However, there is ongoing competition between Puerto Rico and El Salvador as the latter has allowed crypto investors to trade without paying income tax and capital gains tax on Bitcoin.

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Apart from these two places, crypto investors can enjoy the same freedom in places like the Cayman Islands, Malta, Switzerland, Nevis, and Portugal, where miners and traders don’t pay income tax.

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