Puerto Rico

Cryptocurrencies in Puerto Rico are legally defined as property. The territory offers a regulated environment for crypto, with dedicated tax incentives primarily under Act 60. However, U.S. federal tax oversight still applies to U.S. citizens residing in Puerto Rico, particularly regarding gains accrued before establishing residency. The Puerto Rico Department of the Treasury, known as Hacienda, administers the territorial tax laws, especially the Act 60-2019 Incentives Code, which governs these tax benefits. For U.S. citizens, the U.S. Internal Revenue Service (IRS) remains responsible for enforcing federal tax obligations. For individuals who qualify as bona fide residents of Puerto Rico, a 0% territorial tax rate applies to passive income, including capital gains, interest, and dividends derived from crypto assets, provided these gains accrue after residency is established. Gains accrued before establishing bona fide residency remain subject to U.S. federal tax rates. Active or business-related crypto income, conversely, is taxed at Puerto Rico’s standard progressive territorial rates, which range from 0% to 33%. Puerto Rico does not levy a Value Added Tax (VAT), its 11.5% sales and use tax (IVU) does not apply to crypto trading. There are no specific holding period benefits, the exemption is determined by whether the gains accrued after establishing residency, not by the duration the asset was held. For corporations engaged in qualifying export services, a fixed 4% corporate tax rate can apply to their crypto-related business income. Specific crypto activities such as staking, mining, Decentralized Finance (DeFi) interactions, and Non-Fungible Tokens (NFTs) generally adhere to these tax rules. Individual bona fide residents receive a 0% tax rate on income from staking and mining, as well as on gains from DeFi activities and NFT sales, provided these incomes or gains accrue post-residency. If these activities are classified as a business, a 4% corporate rate may apply to entities qualifying under Act 60, and expenses related to mining are deductible. Crypto-to-crypto trades are considered taxable events, but any gains realized from such exchanges are also exempt at 0% for bona fide residents if they accrue post-residency. Similarly, converting crypto to fiat currency is not taxed on gains accrued post-residency, only pre-residency accrued gains are subject to taxation. There are currently potential reforms under consideration. The U.S. Fair Taxation of Digital Assets in Puerto Rico Act has been introduced in the U.S. Congress, which seeks to subject digital assets to federal taxes. Additionally, the Governor of Puerto Rico has proposed extending the Act 60 tax incentives until 2055, potentially with the introduction of a 4% capital gains tax.