Puerto Rico LLC to save on taxes

[jobyts]

Can I (US citizen) start an LLC registered in Puerto Rico, move my personal money to the LLC, enjoy the 4% corporate tax on all the intermediate gains I make, manage the LLC money sitting in California, and pay the rest of the US tax rate for only the dividend that the LLC pays me?

 

Or do I need to physically move to Puerto Rico to get the 4% tax benefit?

[LC]

a bona fide resident of Puerto Rico is an individual who:

 

Is physically present in Puerto Rico for at least 183 days during the taxable year;

Does not have a tax home outside of Puerto Rico during the taxable year; and

Does not have a closer connection to the United States or a foreign country than to Puerto Rico.1

[gfp]

Canadian friends of mine tried this - saving on tax by moving to and reincorporating in Puerto Rico - it did not work for them.  Perhaps because they still owned property in Canada or perhaps because of where / how the business earns its income. 

[Guest cherzeca]

a bona fide resident of Puerto Rico is an individual who:

 

Is physically present in Puerto Rico for at least 183 days during the taxable year;

Does not have a tax home outside of Puerto Rico during the taxable year; and

Does not have a closer connection to the United States or a foreign country than to Puerto Rico.1

 

also as I recall, that income on which you are taxed 4% must be PR sourced...I suppose CDs of a PR bank would qualify...but I haven't read this statute in a long time

[jmp8822]

Can I (US citizen) start an LLC registered in Puerto Rico, move my personal money to the LLC, enjoy the 4% corporate tax on all the intermediate gains I make, manage the LLC money sitting in California, and pay the rest of the US tax rate for only the dividend that the LLC pays me?

 

Or do I need to physically move to Puerto Rico to get the 4% tax benefit?

 

I'm not an expert at all, but my understanding when I was reading about it: you do need to move there physically, like LC posted. I was thinking of moving my fund management company and my family there to enjoy the effectively zero tax rate on income and capital gains. If I was single I'd probably do it - family makes it tougher.

[KJP]

The proposed structure also creates a "personal holding company" issue, which imposes an additional corporate level tax on undistributed corporate income.

[jobyts]

My idea is not for personal tax savings. I will have to pay the federal and California taxes for the dividends I get, or the profits I bring back, since I live in Calif.

 

I was thinking of tax saving for the LLC, when the LLC keep buying/selling stocks. Something like a 401K tax saving.