Why I’m not moving to Puerto Rico for Act 20-22 tax savings
July 15, 2021
In this episode, we talk about how your life goals should set the way to your life decisions.
My taxes are starting to get a little bit complicated mostly because I move around a lot. So I decided to get the help of a tax professional that focuses mainly on digital nomad entrepreneurs. And when I reached out to him, he sent me an email back and he asked me what is my goal?
So immediately I'm just thinking, you know, this guy is an accountant. Well obviously it should be obvious to him and I didn't know why it wasn't, but obviously, it should be to optimize my taxes right. I want to pay the least amount of taxes legally as possible. So he asked me, what is my goal? And I sent them this answer and the answer didn't satisfy him. And he just kept on asking me he's like, because the objectives that I have with the strategy that I want to incorporate and the strategy that I was kind of telling him is like, you know, I want to have the flexibility to go travel and do all these different things. He was saying that they don't connect and he asked me to get a phone call with them so you can give me a little bit more detail and I'm getting a little bit more information right?
So right now I have been floating around different parts of Latin America and I'm considering a move to Colombia and I'm also considering a move to all these different places. So here's what I've learned. I've learned that as a U.S. Citizen this is one of two countries that actually taxes on worldwide income. So the other country is Eritrea I probably pronouncing that country wrong. Eritrea. Eritrea. Yeah, Eritrea. Um Man I knew that and I don't know why I totally how do you forget a pronunciation? Anyway, I digress.
Okay so being a U. S. Citizen I get taxed on worldwide income. And the only way for me to actually lower the floor is by moving to Puerto Rico. So Puerto Rico. They have these special tax advantages they're called Act 20 and there's like another one if you just follow these different rules and set up a tax residency in Puerto Rico. Any income that you make outside of Puerto Rico. I think it gets taxed at a very low rate like 4% or something like that. And I think your personal income taxes could even be 0%. I'm not an accountant. So this is why I hired one.
So don't you know this is not for tax advice but what I did want to share is the strategy and the objectives and how those got refined after this conversation that I had with this accountant. So originally I was thinking okay you know I want to optimize my taxes. And I had this conversation with my dad as well and my dad was like, you know, oh hey yeah, just pick the country that has the best tax advantages and go, you know, stack and stack your bank account as much as you can. And then I kind of thought about it, I was like, well that doesn't sound like very much fun. Like I really don't care about the money. Money doesn't really mean anything to me, right? So I can't see myself doing all these rules and all these guidelines.
Living in Puerto Rico, for example, and being trapped on an island and having to be there just because I'm trying to save this money. That loss of freedom, what does that loss of freedom worth to me? And if I had to think about it. Like if someone said you have to be in Puerto Rico for six months and you can't do anything else. I'm sure Puerto Rico is a pretty place. But just having that restriction is worth a lot of money to me and I would be willing to pay probably more than the amount that I'm saving on taxes.
So with this, my objectives were a little bit more refined and I got a little bit more clarity that I am not hoping to optimize taxes in such a way where I am going to use my tax strategy to figure out where I'm going to go in the world and how I'm going to live my life. Instead, I'm going to start with happiness first and think about what my lifestyle looks like, what my life looks like, and then figure out the best tax strategy that I can fit.
So instead of chasing the money, I am just going after what makes me happy, what I'm happy we're doing and what makes me happy is not a lot of paperwork. Being able to move around wherever I want to go with the least amount of hassle, least amount of headaches. And this is actually how I'm developing my strategy. So where can I go where I will be able to do all the things that I want, have the flexibility that I want to not have to do all this paperwork. For example, if I want to Europe, then the paperwork could get really hectic and that's something that I don't want to do, right? So it's not about the money. Because if I go to Portugal for example, they have special programs where I might not have to pay taxes for 10 years.
However, that's not worth it for me. I am not trying to optimize taxes. I am trying to optimize happiness because at the end of the day if I was imprisoned on one island for half my life, just so I can save you know, a couple 100,000 or a couple of million dollars. That's not a very good life. Wouldn't you rather just spend that money to be able to do whatever you want to do and go wherever you want to go and just have this freedom.
So this is why I decided that I am not going to go to the Puerto Rico route. Puerto Rico has been a hot topic lately with crypto investors and all these people that are trying to save money on taxes. Instead, there are a couple of places where I do want to go and I am fitting my tax strategy around what makes me happy. This is Robin Copernicus. Boom, bam. I'm out
Continue your journey with me on my other channels:
So immediately I'm just thinking, you know, this guy is an accountant. Well obviously it should be obvious to him and I didn't know why it wasn't, but obviously, it should be to optimize my taxes right. I want to pay the least amount of taxes legally as possible. So he asked me, what is my goal? And I sent them this answer and the answer didn't satisfy him. And he just kept on asking me he's like, because the objectives that I have with the strategy that I want to incorporate and the strategy that I was kind of telling him is like, you know, I want to have the flexibility to go travel and do all these different things. He was saying that they don't connect and he asked me to get a phone call with them so you can give me a little bit more detail and I'm getting a little bit more information right?
So right now I have been floating around different parts of Latin America and I'm considering a move to Colombia and I'm also considering a move to all these different places. So here's what I've learned. I've learned that as a U.S. Citizen this is one of two countries that actually taxes on worldwide income. So the other country is Eritrea I probably pronouncing that country wrong. Eritrea. Eritrea. Yeah, Eritrea. Um Man I knew that and I don't know why I totally how do you forget a pronunciation? Anyway, I digress.
Okay so being a U. S. Citizen I get taxed on worldwide income. And the only way for me to actually lower the floor is by moving to Puerto Rico. So Puerto Rico. They have these special tax advantages they're called Act 20 and there's like another one if you just follow these different rules and set up a tax residency in Puerto Rico. Any income that you make outside of Puerto Rico. I think it gets taxed at a very low rate like 4% or something like that. And I think your personal income taxes could even be 0%. I'm not an accountant. So this is why I hired one.
So don't you know this is not for tax advice but what I did want to share is the strategy and the objectives and how those got refined after this conversation that I had with this accountant. So originally I was thinking okay you know I want to optimize my taxes. And I had this conversation with my dad as well and my dad was like, you know, oh hey yeah, just pick the country that has the best tax advantages and go, you know, stack and stack your bank account as much as you can. And then I kind of thought about it, I was like, well that doesn't sound like very much fun. Like I really don't care about the money. Money doesn't really mean anything to me, right? So I can't see myself doing all these rules and all these guidelines.
Living in Puerto Rico, for example, and being trapped on an island and having to be there just because I'm trying to save this money. That loss of freedom, what does that loss of freedom worth to me? And if I had to think about it. Like if someone said you have to be in Puerto Rico for six months and you can't do anything else. I'm sure Puerto Rico is a pretty place. But just having that restriction is worth a lot of money to me and I would be willing to pay probably more than the amount that I'm saving on taxes.
So with this, my objectives were a little bit more refined and I got a little bit more clarity that I am not hoping to optimize taxes in such a way where I am going to use my tax strategy to figure out where I'm going to go in the world and how I'm going to live my life. Instead, I'm going to start with happiness first and think about what my lifestyle looks like, what my life looks like, and then figure out the best tax strategy that I can fit.
So instead of chasing the money, I am just going after what makes me happy, what I'm happy we're doing and what makes me happy is not a lot of paperwork. Being able to move around wherever I want to go with the least amount of hassle, least amount of headaches. And this is actually how I'm developing my strategy. So where can I go where I will be able to do all the things that I want, have the flexibility that I want to not have to do all this paperwork. For example, if I want to Europe, then the paperwork could get really hectic and that's something that I don't want to do, right? So it's not about the money. Because if I go to Portugal for example, they have special programs where I might not have to pay taxes for 10 years.
However, that's not worth it for me. I am not trying to optimize taxes. I am trying to optimize happiness because at the end of the day if I was imprisoned on one island for half my life, just so I can save you know, a couple 100,000 or a couple of million dollars. That's not a very good life. Wouldn't you rather just spend that money to be able to do whatever you want to do and go wherever you want to go and just have this freedom.
So this is why I decided that I am not going to go to the Puerto Rico route. Puerto Rico has been a hot topic lately with crypto investors and all these people that are trying to save money on taxes. Instead, there are a couple of places where I do want to go and I am fitting my tax strategy around what makes me happy. This is Robin Copernicus. Boom, bam. I'm out
Continue your journey with me on my other channels:
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