Why Millionaires Are Flocking to This Island

October 26, 2021

Why Millionaires Are Flocking to This Island

When Facebook whistleblower Frances Haugen isn’t flying around the world urging politicians to regulate her ex-employer, she’s apparently living off little-taxed cryptocurrency profits in her new home of Puerto Rico.

“For the foreseeable future, I’m fine, because I did buy crypto at the right time,” Ms Haugen said in an interview with The New York Times, when asked how she’s supported herself since leaving Facebook.

Her move to Puerto Rico in March was motivated by a desire to join her “crypto friends” on the island, as well as a health condition, the former Facebook exec added.

Puerto Rico, an unincorporated US territory known for its beaches, rainforests and Spanish Colonial architecture, has become a hub for cryptocurrency investors like Ms Haugen in recent years, thanks largely to its status as a tax haven.

Under a law called Act 22, people who live in Puerto Rico for at least half of the year are exempt from taxes on interest, dividends and capital gains – meaning they can cash in on earnings from crypto and other investments without handing money over to the tax man.

In a bid to take advantage of the loose tax laws, top crypto firms including the hedge fund Pantera Capital and NFT marketplace SuperRare have ditched New York and Silicon Valley for Puerto Rico in recent years.

Other crypto investors, flush with cash amid the crypto boom, have used their little-taxed profits to buy up property in San Juan with a vision to build a new society called “Puertopia.”

YouTube star and crypto investor Logan Paul also moved to the country earlier this year and has been renting a mansion for about $US55,000 ($A73,000) per month – a move that Mr Paul admitted was primarily motivated by the country’s tax policies.

“In Puerto Rico you’re motivated to do more and make more money because of the implications that come with it,” Mr Paul told Time Magazine.

Logan Paul rents a house in Puerto Rico. Picture: Suzanne Cordeiro/AFP

The territory’s lax tax laws have also drawn interest from more traditional financiers – including legendary hedge fund manager John Paulson, who mulled moving to the island for tax reasons in 2013.

While supporters of Puerto Rico’s tax breaks argue that they bring much-needed investment to an island that lags behind the mainland US in economic development, critics have slammed outsiders for driving up housing prices in what they call a modern day form of colonialism.

For Ms Haugen’s part, she gave little detail on her crypto investments and friends in The New York Times interview – and it’s unclear if she will qualify this year for Puerto Rico’s tax exemptions under Act 22, which was passed in 2012 as “The Individual Investors Act”.

The law stipulates that investors like Ms Haugen must live in Puerto Rico for 183 days out of the year in order to qualify for the exemption.

They’re also encouraged to show other evidence of local residency by obtaining local bank accounts, driver’s licences and voter registrations.

Since Ms Haugen moved to Puerto Rico in March and has since flown to Washington D.C. and London to meet with politicians and testify about Facebook, she may not rack up enough days on the island to quality for the exemption.

Bill Burton, a former Obama administration press secretary who is helping Ms Haugen with media relations, did not immediately respond to calls seeking comment.