| Getting your Trinity Audio player ready... |
Puerto Rico’s Department of Economic Development and Commerce (DDEC) has announced that a number of activities tied to digital assets can obtain a 4% tax cut from the government.
Acting Secretary of the DDEC Iris Santos confirmed via a letter that the tax benefits extend to firms involved in staking activities, a class of consensus mechanism for distributed ledgers. The 4% corporate tax reduction, which also covers mining digital currencies, has elicited excitement in the “cryptoverse” that would likely see firms from other regions flock to the Caribbean nation.
The document provides clear definitions for Web3 terms like staking, digital assets, mining, and blockchain technology to avoid ambiguity. However, the paper clarified that companies seeking the tax windfall are still mandated to apply to the DDEC for approval before receiving the tax benefits.
“On repeated occasions, we received queries related to the ‘blockchain’ to clarify which activities could be eligible under the Incentive Code. This Circular Letter provides a precise and accurate legal framework, which positions Puerto Rico at the forefront of this technology worldwide,” said Carlos Fontán, Director of the DDEC Business Incentives Office.
The 4% tax incentive derives its validity from a 2019 legislation that rolled 73 Puerto Rican islands’ tax incentives under one umbrella called Act 60. Under the regulation, any firm exporting service outside Puerto Rican borders can qualify for the 4% corporate tax reduction, with call centers and software manufacturing firms taking advantage of the tax cuts.
“A 4% tax on the income generated from staked assets is a win for Puerto Rico,” said Keiko Yoshino, executive director for the Puerto Rico Blockchain Trade Association. “Developing consistent tax revenue is the first step to creating dedicated funding streams for social impact programs that address problems like child poverty.”
Puerto Rico has always relied on tax incentives to attract foreign direct investment into the country, but it will have to offer more than tax cuts to be the leading player in the Caribbean region.
The Caribbean is baiting digital currency firms
Caribbean countries are attracting digital currency startups to set up operations in the region as they attempt to wrestle control from Southeast Asia. The Bahamas pulled a major heist after FTX announced it was setting its headquarters in the country, opening the floodgates for more firms to come in.
Barbados, Dominica, Guyana, and Saint Kitts and Nevis are pulling strings to lure global digital currency companies to their jurisdiction. Baited by tax cuts and transparent regulatory frameworks, several firms have hinted at expanding operations in the Caribbean.
Watch: LiteClient: Scaling Blockchain with Simplified Payment Verification
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
