Over time, the blockchain space has increased in popularity as entrepreneurs find themselves struggling to take market share across different industries. This situation has left the majority of such businesses with the responsibility of having to divulge the proper and functional structure of token sales, which must be made strategically to abide by evolving regulatory rules and reporting demands. Thankfully, many blockchain companies have found a simple solution here in Puerto Rico.

Blockchain in Puerto Rico has become the perfect answer for businesses in need of a favorable regulatory environment run by a United States legal jurisdiction—and with lower taxes. Adding onto this, the exportation of blockchain-related services is now considered an eligible business activity under the Act 60 tax incentive program.

Puerto Rico’s Interest in the Blockchain Industry

While other jurisdictions have restricted the expansion of blockchain technology, Puerto Rico has expressed a growing interest in this field since former Governor Ricardo Rosselló’s administration. In an interview with CNBC, former Governor Rosselló said that his administration saw fit the opportunity to “take advantage of the blockchain component of [cryptocurrency] because it has transformative and disruptive components for business and for government.” Moreover, the Commissioner of Financial Institutions in Puerto Rico has issued counsel on acquiring International Financial Entity charters, which further benefits the blockchain industry.

Pertaining to taxation, Puerto Rico has one of the lowest corporate income tax rates in the world—only 4%—on account of its economic incentives. Although previous acts have attracted business owners to Puerto Rico since their start in 2012, only now has the blockchain community (not including the industry pioneers who have been here since 2015) started to pay attention. Advocates of this up-and-coming technology are keen on the island.

Varying between token types, there are multiple different structuring options open to blockchain businesses who want to launch a token sale from Puerto Rico. The most typical among these seems to be the “blockchain-as-a-service” model. Utilizing this model, a blockchain business that supplies a service through a software or platform retrieved by customers outside of Puerto Rico can issue or overhaul tokens from Puerto Rico and be eligible for a 4% tax rate on the profits. This arrangement would fall under the Act 60 Export Services, and the tokens would serve as prospective claims on the services bestowed by the business. This strategy provides tokens with a supplementary structural component that designates their verifiable utility. Henceforth, this aids the notion that the tokens shouldn’t be bound to the principles of securities as created by the Security Exchange Commission (SEC).

The foregoing proposal was devised by one of CASPR’s (Consulting and Ancillary Services of Puerto Rico) customers with guidance and aid from Giovanni Mendez, Esquire, of GEO (Global Economic Optimization) Tax.

As qualified promoters with the Puerto Rican government, PRelocate advocates that blockchain entrepreneurs should contemplate using Puerto Rico for their token launch. Interested business owners can contact us directly.

Disclaimer: Neither PRelocate, LLC, nor any of its affiliates (together “PRelocate”) are law firms, and this is not legal advice. You should use common sense and rely on your own legal counsel for a formal legal opinion on Puerto Rico’s tax incentives, maintaining bona fide residence in Puerto Rico, and any other issues related to taxes or residency in Puerto Rico. PRelocate does not assume any responsibility for the contents of, or the consequences of using, any version of any real estate or other document templates or any spreadsheets found on our website (together, the “Materials”). Before using any Materials, you should consult with legal counsel licensed to practice in the relevant jurisdiction.