Once, Puerto Rico was seen as the perfect place for digital currency startups. It had significant tax incentives in place from which entrepreneurs and investors benefited. More so, it has increased business solutions developed in this so-called US-controlled nation.

However, either by design or because of the economic shortcomings which the COVID-19 pandemic and other disasters have brought, there is a need for Puerto Rico to look for new sources of income. Consequently, a new law has been passed that is said to change the "digital currency tax incentive programs' structure in place.

Specifically, Wanda Vazquez, governor of Puerto Rico, approved last week, a new law called the Law 40-2020 that changes the manner tax incentives are given to new residents. Meanwhile, El Nuevo Dia, a Spanish media organization, pointed out that the prior annual fee amounting to $300 for the people who moved to Puerto Rico and applied for the enticement has been increased.

Increase in Incentive

To date, the incentive has increased to $5,000 and is anticipated to produce an extra "$11.9 million for the government." Additionally, there is a net reduction in tax contribution equivalent to three percent for any individual earning $100,000 or below.

In correspondence with Decrypt, according to reports, Giovanni Mendez, the Puerto Rican tax consultant, who also represents the Geo Tax firm, said, the increase in maintenance costs for the rulings elevates the bar for those taking part, as well as the investors planning to transfer to Puerto Rico for the tax benefits.

Meaning, the higher fee is assuming that all participants are millionaires, holding fortunes with instant liquidity. Mendez added those in the community are already aware that this is not the case for a significant portion of entrepreneurs and investors who have moved to the island.

Now, the tax consultant explained, for any individual who wishes to relocate to the island, the upfront expenditures are quite higher, to some degree, opposing the existing tax incentives. Also, there is a filing fee of $750, a special fund fee of $5,000, and if an application filed is approved, there is an obligatory annual contribution of $10,000.

There is a possibility for the obligatory yearly contribution to be made in two separate payments and a new fee of $5,000.

Blockchain and Digital Currency

Also, according to Mendez, the structure will be damaging to entities in both the digital currency and blockchain spaces. He added, "Regarding investors in the cryptocurrency market," the rise in costs impacts whether some will stay on the island because of the market's volatility, not to mention changes in value.

Incidentally, the new Incentives Code took sections incorporating advantages to the blockchain and crypto markets, which is something favorable. However, it contradicts the last legislation.

Such changes could force the people who have opted to call the area home to pack up and search for cheaper and better alternatives. More so, Puerto Rico has been hit by several storms in the past years that have nearly destroyed its infrastructure, and the US has been uninterested in providing a significant amount of relief or assistance.

Check these out!