American legislator aims to crack down on cryptocurrency investors utilizing Puerto Rico for tax advantages

A bill has been put forth by a member of the House of Representatives to prevent investors from using Puerto Rico as a crypto tax haven. According to a report by Bloomberg on April 21, New York Representative Nydia Velázquez introduced the Fair Taxation of Digital Assets in Puerto Rico Act. This bill aims to modify existing laws in the territory to mandate certain investors to pay local and federal taxes on capital gains, including those from digital assets. The proposed legislation would amend Puerto Rico’s Internal Revenue Code to make income from cryptocurrencies subject to federal tax laws.

Rep. Velázquez voiced concerns about the impact of crypto investors on Puerto Rico’s recovery and local economy, noting that the influx has driven up housing costs, displaced residents, and strained an island where nearly 40% of the population lives in poverty. She also mentioned the billions in lost tax revenue for the federal government as a result of these tax incentives.

Since 2012, Puerto Rico has been known as a tax haven for many in the crypto industry, thanks to exemptions granted under various tax incentives acts. The territory has attracted investors like Dan Morehead of Pantera Capital, Brock Pierce, and Logan Paul.

Rep. Velazquez’s office estimated that Puerto Rico could lose around $4.5 billion in revenue from 2020 to 2026 due to the existing tax incentives. In contrast, Governor Jenniffer González-Colón proposed extending Act 60, which is set to expire in 2035, until 2055 with an added requirement for applicants to be subject to a 4% capital gains tax rate, lower than the standard rate in the US.

It remains uncertain whether the bill put forth by Rep. Velazquez, a Democrat, would garner enough support to pass in the Republican-controlled House or Senate. Both chambers are expected to consider legislation on stablecoins and a regulatory framework for crypto in the coming months.

Source: Bloomberg

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