Act 22 of 2012

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Act 22 of 2012 —also known as the Act to Promote the Relocation of Investors to Puerto Rico (Spanish: Ley para Incentivar el Traslado de Inversionistas a Puerto Rico)— is an act enacted by the 16th Legislative Assembly of Puerto Rico that fully exempts local taxes on all passive income generated by individuals that reside in Puerto Rico.[1][2][3]

The act was enacted to promote the immigration of high-net-worth individuals to the island in hope of such individuals investing in the local economy.[4] To ignite the interest of these new investors Act 22 provides a total exemption from Puerto Rico income taxes on all passive income attained or accrued after the individual establishes residency.[5]

The act, however, has come under scrutiny by some detractors, such as Jeffrey Farrow, a former White House official from the Clinton administration, and John Buckley, a former tax counsel for the Democratic Party on the United States House Committee on Ways and Means, who have described the act as a way to make Puerto Rico a tax haven.[6] Congressmen Chuck Grassley (R-Iowa) and Max Baucus (D-Montana), Chairman of the United States Senate Finance Committee, have also expressed their opinion on the matter.[7] Others, however, such as José Pérez Riera and Alberto Bacó Bagué, both former Secretary of Economic Development and Commerce of Puerto Rico, and current Secretary Manuel A. Laboy Rivera,[8] see the act favorably and describe it as being a way for Puerto Rico to overcome its economic struggles and its six years long recession.[7][9]

As of March 2013 only about a dozen individuals have taken advantage of the act, although many others have expressed their interest after the media reported that billionaire John Paulson was considering to relocate to Puerto Rico.[7][10][11] The report was later denied by Paulson but media coverage increased inquiries to local accountancy firms by 400% after the story broke.[7][12][13][14]

Act 22 is one of a set of economic incentives that the Government of Puerto Rico has developed for the development of the Island's economy. Additional incentives offer unique benefits to investors for sectors like manufacturing, hospitality and tourism, international insurance and banking, export services, and agriculture.[13]


  • Physical Presence: the investor has to be physically present in Puerto Rico 168-183 days per year, and in the United States for less than 90 days in the year.
  • The restrictions may have been modified to require only that the investor have spent more time in Puerto Rico than any other single place in the world.
  • The restrictions may have added a requirement that the investor make a minimum five thousand dollar per year donation to a Puerto Rico registered non-profit organization.
  • Act 22 is for individual investors and not for corporations. Act 20 was established for corporations including Microsoft and Hewlett Packard.
  • Tax Home Test
  • Closer Connections Test: a series of factors to determine if the investor has maintained more significant contacts with Puerto Rico than with the United States of foreign country


  • 0% tax on: Dividend and Interest Income, short-and-Long Term Capital Gains for New Puerto Rico Residents, and on Federal Taxes on Puerto Rico Sourced Income.
  • Tax Savings on investment portfolio returns.
  • Tax Decree valid until 2036.


  1. ^ "Act to Promote the Transfer of Investors to Puerto Rico". Act No. 22 of 2012 (PDF) (in Spanish). Archived from the original (PDF) on May 14, 2014. Retrieved March 3, 2013.
  2. ^ "The Puerto Rico Advantage—Sun, Sand and Zero Taxes" (PDF). Department of Economic Development and Commerce of Puerto Rico. Retrieved March 28, 2013.
  3. ^ "Income tax exemption granted to non- residents who establish domicile within a specified timeframe" (PDF). PricewaterhouseCoopers. December 17, 2012. Retrieved March 28, 2013.
  4. ^ "Puerto Rico Export Services and New Resident Tax Incentives" (PDF). Department of Economic Development and Commerce of Puerto Rico. Retrieved March 28, 2013.
  5. ^ a b c "Act 22 – The Individual Investors Act". Retrieved 2018-09-04.
  6. ^ La Roche, Julia (March 11, 2013). "This New Puerto Rican Law Makes Wealthy People Want To Move There To Avoid Taxes". Business Insider. Retrieved March 28, 2013.
  7. ^ a b c d Marino, John (March 28, 2013). "Law 22 attracting millionaire investors to Puerto Rico". Caribbean Business. Archived from the original on 2013-10-23. Retrieved March 28, 2013.
  8. ^ "Senado confirma a Manuel Laboy como jefe del DDEC y PRIDCO". Business Insider. Retrieved 2018-09-04.
  9. ^ "DDEC Secretary Reaffirms Government Is Heading towards Puerto Rico's Economic Upsurge". Retrieved 2018-09-04.
  10. ^ Burton, Katherine (March 11, 2013). "Paulson Said to Explore Puerto Rico as Home With Low Tax". Bloomberg News. Retrieved March 28, 2013.
  11. ^ Gongloff, Mark (March 11, 2013). "John Paulson Mulls Move To Puerto Rico For Sun, No-Tax Fun: Report". The Huffington Post. Retrieved March 28, 2013.
  12. ^ "Paulson Says He Has No Plans to Relocate to Puerto Rico". Bloomberg. 2013-03-15.
  13. ^ a b "Puerto Rico Solutions". Archived from the original on 2013-10-23. Retrieved 2013-03-28.
  14. ^ La Roche, Julia (2013-03-15). "Hedge Fund Billionaire John Paulson Not Defecting To Puerto Rico To Dodge Taxes". Business Insider. Retrieved 2013-03-28.