Puerto Rico’s top economic development official says he’s actively cooperating with US tax authorities as they investigate about 100 high-income individuals who are suspected of misusing the island’s incentive program to dodge federal taxes.
Manuel Cidre, Puerto Rico’s Secretary of Economic Development and Commerce, said his office has been working with the Internal Revenue Service since 2021 to identify people who may be abusing the island’s lucrative tax breaks. The IRS says that it has identified about 100 people who failed to meet the rules, and it expects “many of these cases to proceed to criminal investigation.”
“When I first took office we met with the IRS and put ourselves entirely at their disposal,” Cidre said in an interview Tuesday. “We are cooperating on this matter and other issues.”
More than 5,000 hedge fund managers, cryptocurrency traders and other Americans have moved to the US territory over the last decade to enroll in a program that lets them avoid paying federal income tax and no taxes at all on dividend, interest and capital gains income. But to qualify, they must spend at least 183 days a year in Puerto Rico, and income from the mainland is still subject to federal taxes.
Cidre said making sure those who qualify for the incentives are complying with rules is a “priority.” His office has expelled more than 300 people from the program since 2021.
Last week, Bloomberg reported that IRS investigators are focusing on whether people lied about how much time they spend on the island and the source of their income. US officials are also looking at the promoters, attorneys and accountants who marketed the tax program, according to a person familiar with the probes.
One tax attorney, Steven Toscher, was skeptical of the IRS statement about the number of taxpayers under investigation.
“To say we’ve recently identified 100 and many of them might be headed to criminal investigation – it sounds to me like they might be getting a little out over their skis,” Toscher said. “These are very complex determinations as to whether somebody qualifies for the benefits of the Puerto Rican tax code.”