The Puerto Rico Senate has amended Project 488 to extend the 4% preferential tax rate to non-resident US citizens, in addition to its original goal of equalizing the tax burden for local and foreign investors. Senator Adrián González Costa of the Puerto Rican Independence Party (PIP) criticized the amendment, stating that it would allow non-resident US citizens to buy, sell, and renovate properties in Puerto Rico, as well as own shares in corporations, while paying a preferential tax rate on capital gains.
The original project, part of a package presented by Governor Jenniffer González to reform the tax system, aimed to establish a voluntary 4% tax rate on passive income, interest, dividends, and capital gains for all investors. The amendment has been met with criticism, with González Costa arguing that it creates an unfair advantage for non-resident investors.
According to the Senate Finance Commission’s report, taxpayers who opt for this tax rate would not be subject to the alternative basic contribution or certain tax credits. The new model would have significantly reduced the tax liability for certain individuals, such as Francisco Domenech, Secretary of the Governor’s Office, who would have paid $80,000 instead of $300,000 in taxes on the sale of his lobbying firm Politank.