Episode Transcript
[00:00:00] Speaker A: One of the most effective ways is reducing your tax rate from, in this case, 50%, a blended of tax rate with the IRS in the state from 50% to only 4% in Puerto Rico. And in some instances it could be as low as 2%. So from 50% to 2%, that's a massive swing. And then if you annualize that for a number of years, it definitely adds up to what's important for you.
[00:00:24] Speaker B: Welcome to Skindeet. I'm Dr. Ana Chacon. And today we have a very special guest joining us. Get ready for some expert insights you won't want to miss.
I read a lot about you, heard a lot about you.
You are an accountant and you're an expert in Puerto Rican taxes and tax saving strategies, including Act 60. I'm very excited because this is something I've thought of a lot, if you don't mind introducing yourself. And I think you've also lived in Miami, too. Are you from Miami or.
[00:00:56] Speaker A: That's right. So I'm born and raised in Puerto Rico and relocated to the US Shortly after college. So yes, we have office in Miami and we have offices in Atlanta. And recently I've been spending more and more time in Puerto Rico. So spend time in Puerto Rico, Miami, and then of course, Atlanta.
[00:01:14] Speaker B: And where do you live right now? You live in Puerto Rico?
[00:01:18] Speaker A: I live in Puerto Rico, yes. I live in Puerto Rico.
[00:01:21] Speaker B: And then if you don't mind introducing yourself to the audience, who you are, how did you end up specializing in your services?
[00:01:30] Speaker A: Yeah, sure. My name is Victor Delerme. I'm the founder of Dalerme CPA. We've been in business for the last 16 years.
As I said, we have offices in San Juan, Puerto Rico, Miami, the Brickell area, and of course, Atlanta. So my CPA firm, we are a consulting driven organization and we provide services to clients in the spectrum, different industries, if you will. And for the last few years, we've been specializing more and more on Puerto Rico tax incentives. Right. So we, we help clients relocate their businesses to Puerto Rico and we help investors to relocate to Puerto Rico. It's one of the areas in which we specialized. And one of the reasons we drive that niche is because Puerto Rico offers great tax incentives. Then of course, health, medical professionals that own their consulting organization and so forth have been relocating to Puerto Rico. And those are some of the clients that we have been consulting with for the last few years. As you said, Dr. Feeney. And then of course, Eileen Coldera.
[00:02:32] Speaker B: Yeah, this is a really hot topic because in the US you definitely Pay a lot of taxes. There's only two things guaranteed, I think that they say death and taxes. So if you can minimize those.
[00:02:45] Speaker A: Yeah, absolutely. So if you are a high net worth or high income earner. Right. If you're a physician, let's say you highest tax bracket, it's call it 37%.
And then you reside, let's say New York, New Jersey or California with the state tax, it's 10, 12%. That's 50% of your money gone. Right. And for what?
[00:03:08] Speaker B: Right?
[00:03:08] Speaker A: Where that money could have gone to your next real estate deal, it could have gone to your vacation home, it could have gone to your kids education fund, or it could have gone to your retirement plan. Right. With the taxes that you're overpaying every year, instead of overpaying taxes, you can add years to retirement plan. Right. And one of the ways, so we have a number of ways that we can help our clients, but one of the most effective ways is reducing your tax rate from, in this case, 50%, a blended of tax rate with the IRS in the state from 50% to only 4% in Puerto Rico. And in some instances it could be as low as 2%.
So from 50% to 2%, that's a massive swing. And then if you annualize that for a number of years, it definitely adds up to your, to what's important for you. Right. So instead of overpaying taxes, you can actually build wealth and then take care of the things that are important for you as an individual and then of course, as you know, with your family and so forth.
[00:04:06] Speaker B: No, I know, that's kind of how I feel. It's like every day, every year after, you know, April, it's like you take a huge setback, you know, just kind of travel if you step backwards and it's very hard to even recover from that. You know, stressful, all these other things.
[00:04:26] Speaker A: Yeah, so one of, one of the, one of the areas that we see that people, business owners, physicians, you know, high income earners, is they, they work with a tax preparer. They don't work with a strategist or a CPA that helps them basically help them to keep more of what they earn. Right. So they work with someone that's just going to be preparing tax returns and then end up overpaying taxes, typically 40 to 50% more of what they otherwise would have paid. If they're working with someone that specializes in reducing taxes instead.
[00:05:03] Speaker B: No, that's really important. I mean, that's the question everybody wants to know and then talk a little Bit about, you know, I know some doctors in Puerto Rico. What kind of incentives are there for doctors? You know, before these taxes, I think a lot of doctors were leaving Puerto Rico. They were just leaving.
[00:05:20] Speaker A: Yeah. So there used to be an incentives for physician. Right. That. But primarily the best incentive that you could have as a Puerto Rico business person would be if you're exporting services. Right.
So if you can provide your services through technology, through platforms, right. And your patients are call it in the mainland or outside, you know, outside of Puerto Rico, then you qualify for a 4% tax rate. Right. So if you can see your patients through telehealth, right. And you're exporting your services, then you could qualify for a 4% tax rate. Right. And then of course there's incentives on low taxation on property. There's no federal income tax, there's no taxation in your income that you generate generate in Puerto Rico. You're not going to be taxed in the US So every single dollar that is sourced to Puerto Rico that you generate by providing services out of Puerto Rico, it's going to be tax free for federal tax purposes and only it's going to pay 4% tax in Puerto Rico. Not only that, but let's say that you are a physician but you're also an investor.
Nowadays people are specializing in having their own career but. But also do investments. So to. So on the side of their learning how to do investments and they're doing crypto, they're doing option stocks and so forth, you could qualify for a 0% tax in your capital gains, right.
So you could basically have two setups. You can have your export services, which is your profession. You're exporting your services, providing service to your patients outside of Puerto Rico through telehealth or so or management.
And then you could also have then capital gains tax free in Puerto Rico. Right. So it's a great incentive if you are a high income earner and also have capital gains.
[00:07:15] Speaker B: How is that even possible? Is that what the 4% or. This is something completely different. I never heard of anyone not paying taxes on capital gains.
[00:07:23] Speaker A: Sure, yeah. So Puerto Rico x60 for simplicity, offers two very distinct tax incentives. Tax decrease, if you will. Number one is the one for business owners, right? If you're exporting a service or if you're exporting a service, like a professional service, like a legal service, financial services or health services, including medical and so forth. If you're exporting that service, you qualify for a 4% tax rate. Okay, so that's for business people.
Then there's other incentive, which is the one for investors, right?
That one offers a 0% tax rate in capital gains. As of right now, eventually, potentially it's going to go up to 4%. That's going to back and forth. But as of right now, it's 4%. I'm sorry, 0% tax on capital gains, right? So if you're a physician and you have a telehealth business, or you can consult or manage your practice or manage your office right out of Puerto Rico, and then you have Doctors in the US you will pay a 4% tax rate. But also if you are pretty good at investments, right? And you're making fifty thousand, a hundred thousand, hundreds of thousands dollars in capital gains and you are a bona fide resident of Puerto Rico, you qualify for a 0% tax rate, right? So that's why we are doing it more and more, because our clients are benefiting greatly, right? Just think about it. Doctors, physicians typically have a great career, right? They're earning more every year. As you become better in your practice, in your skill, you're going to be earning more money.
But then you feel like you're overpaying taxes, like, because the tax bill is just only climbing, it's only going up, right?
And then you start wondering, am I overpaying taxes? Then you ask yourself, why is it my CPAs not do anything about it, right? And then you ask yourself, did I go to medical school all these years for this? Like, I'm basically giving my money away, right? And that's why we, we always advise to partner with a strategist that's going to be working along with you, helping you to have a better financial picture, including your tax, your tax portion of it, Right? And that's why it's so important to deliver this message.
[00:09:48] Speaker B: And actually, you're the only specialist I've really met in this area. Is it common for accountants in Puerto Ric to specialize in this and this sort of offering and strategy or.
Yeah, it is coming.
[00:10:02] Speaker A: Yeah. So it is. It's not as common. It's natural for me because I was born and raised in Puerto Rico, yet I developed my career in the States, right? And then as a way for me to grow the economy in Puerto Rico and then of course, you know, grow my business and also help my clients, we definitely discover and leverage all these tax incentives that Puerto Rico does offer.
One of the best ways that we help our clients is that we are CPAs both in Puerto Rico, and we're CPAs as well as in the U.S. right? So we understand the tax law in Puerto Rico and we understand the tax law in the U.S. so when we're working with our clients, we're servicing in both jurisdictions.
Normally, US Firms do not know tax law in Puerto Rico, and local firms in Puerto Rico do not know as well the tax law in the US we have the privilege of actually being experts on both, and then we advise our clients on both. So when they're working with us, they're working with both jurisdictions at the same time.
[00:11:02] Speaker B: And a couple things, just because I've been thinking about this a lot. So what is the catch? You've got to live in Puerto Rico more than six months of the year. How do they check that? I also heard that there's very heavy audits in this area.
[00:11:16] Speaker A: The important thing is that you are compliant.
That's what you want to make sure of, that you are compliant.
Government is offering you a 0% tax rate in the US and then the government of Puerto Rico is offering you a 4% tax rate or 0% tax rate. The only thing you need to do is to be compliant. And yes, it is required for you to be a bona fide resident of Puerto Rico in order for you to qualify for the incentives.
So it would be then a matter of making sure that your lifestyle, it's compatible with you being in Puerto Rico for six months out of the year, right? And then, of course, you're going to be having a positive impact on the economy in Puerto Rico. You're going to buy real estate. You're going to plug into a great network of professionals and other people that are also participating in the program. You're also going to be participating and learning more about the Puerto Rico culture and so forth. And at the same time, you're going to be benefiting from a great tax incentive. So if you do that for a number of years, think about it. So let's say, like a lot of professionals think about retirement, right? So if you do that, if you do this program for a number of years, three, four, five years, maybe in five years you have enough money saved up that you retire, that you can do other things that you're very passionate about besides practicing your, your, your skill, your business, right? So see it as a strategy, see it as a lifestyle change, and then of course, as a blended new culture that you will be, you know, be part in Puerto Rico.
[00:12:49] Speaker B: So to answer the second part of my question, how common are audits? Because when this first came out, it was a hit. You know, I heard about it. I said, no, no, way, this can't, this can't be, you know, and then I have some patients that have moved from California to Puerto Rico, Even some startup CEOs, there's some dermatologists there that are doing amazing real estate in, I think it's El Dorado has boomed. It's more expensive than it is here in Miami.
[00:13:17] Speaker A: Yeah. So Dorado is a, is a hotspot for expats in Puerto Rico.
So Dorado has become a, is a beautiful town, it's a beautiful city and it's become a great place for a lot of expats to move to reside in as well as, you know, places in Omacao and so forth. San Juan is La Verde de Condado, you name it.
So as I said, the important thing is compliance, right? So if you're compliant, then you don't have to worry about audits, right? Because you are following the rule and you're working with a, with experts that are professionals in both jurisdictions in Puerto Rico as well as in the U.S. right. So if you're compliant, you don't have to worry about audits. You only worry about audits if you're like, if you're not doing things correctly, right? Like if you're not filing your taxes, you're not paying your taxes, you don't have your documents in order, if you're not compliant with like the 6 months rules, Etc. So if you're compliant there, you don't have to worry about the audits. So in our practice we haven't seen any. Right. Just because we help our clients to be fully compliant. And the important thing is that you follow the rule, you follow the law and then you don't have to worry about any audits.
[00:14:24] Speaker B: What are the most common misconceptions and how do you approach this differently or tax planning differently for C level executives with an international footprint compared to a local business owner.
[00:14:38] Speaker A: So here's how we work. We normally have a consultation with our clients that are interested in participating in the Puerto Rico tax incentives. Right. We have a holistic approach. We spend, you know, 45 minutes an hour. Oftentimes we have multiple meetings for us to understand the background of the executive or business owner or investor, right?
The personal background, where they currently are and where they want to be.
Then we understand their investments, right? If the investments are in crypto, if their investments are in stock, on options, if they're real estate investors, if they are in health and they're legal and so forth. And then we understand the mix of their business, whether the business can be exported, their services can be exported out of Puerto Rico to the mainland, Canada, Mexico, you name it.
We need to understand holistically the persons individually and then the business and then the investments. Right. And then based on that, we, we put together a comprehensive plan in order for them to execute and benefit from the Puerto Rico tax incentive, the X60, if you will. Right.
So once we have that, then we move forward. Right. Every single client, every single business for the most part is different. Right. None is exact the same. That's why we spend time educating our clients, understanding the background, where they are and they want, where they want to be and then we go from there.
[00:16:03] Speaker B: I'm sure you have a lot of success stories.
That's one of the names of our podcast, it's called Skin Deep Success Stories. Can you help walk us through a success story where you helped a client maximize profits? Kind of. What difference did it make? You know, how did their lifestyle change? As I mentioned, your clients are really happy as far as I know. Anything memorable that you can think of?
[00:16:28] Speaker A: Absolutely. I have many.
But let me share with you. The business owner in the financial services field or legal field, we have two that are very similar, relocated to Puerto rico under Act 60. Right. And their prior service provider was not expert, as I said before, in Puerto Rico Act 60 or tax law, it only knew a little bit. It wasn't even an expert on U.S. tax law. Right. This business owner has sold an interest in his business on a business. He sold a participation on the business. Right. And therefore he had a capital gain and paid close to $800,000 in taxes to the IRS while he was an X60 degree holder. Right. And was a bona fide resident of Puerto Rico. So we had a consultation and then we did a discovery call and we uncovered that he in fact overpaid taxes in the tune of $800,000. Right. So we quickly put a program, put a trial strategy and execute the strategy for the client. And he is very happy with his refunds. Right. So we have a number of those and think about it. So if you have an extra, call it $800,000, half a million dollars, a million dollars that you were not counting on and all of the sudden it comes to you, basically it's a bit of a game changer, right?
So because with that you can do so many different things that are important for you, right. You know, you can start that new venture, right. You can put money into your kids education, basically it's paid for. Right. You can have that nice home in Puerto Rico like so many different things like that. We have a number.
And one of the reasons that I enjoy what I do the most is because we're able to help people's lives, like make changes, improvements and enhancements. Right. Through our expertise, through our knowledge.
[00:18:26] Speaker B: Tell me a little bit about how you started your firm after earning your cpa. What are some challenges you faced? How big is your team?
How did you overcome and become a successful small business or. Well, you have a large business now, a leader.
[00:18:42] Speaker A: So I left corporate, one of the big fours, left kpmg. And so I spent a number of years in corporate. Great experience, great knowledge. But I noticed that I was not able to have a direct impact on the people that I wanted to work with. Right.
And so I broke out on my own and, you know, armed with a laptop and a printer and a CD with a software. That's how it was. Right. I don't know the audience if they recall what software and a CD was like. And having a printer. That's basically how I started. It was just me. This is before Facebook and before social stuff like that. So the way people conducted business was different, the way people network was different.
And it was a journey, and I've enjoyed the journey every single year. Right. I've been in business for the last 16 years, and I've been able to help many people throughout the years. Right. I've been able to collaborate, I've been able to be a great partner, been able to meet interesting people, have been able to travel around the world and help clients around the world. And now the phase in which we are in, so My team is 30 people across four different offices, and we're growing right now. As a leader of the organization, my goal is to have a great team and then of course, have a positive impact in the people that we work with. Right. So the. My team grow individually, grows as a, you know, as a team, and then that we help our clients achieve, you know, financial success and so forth. Right. So that's my journey and I do enjoy it, and hopefully I'm healthy enough for me to keep going.
[00:20:22] Speaker B: What are some pitfalls or mistakes you see when companies try to take advantage of tax incentives without proper guidance?
[00:20:30] Speaker A: Absolutely. So you want to make sure that you. When you are looking into a strategy. Right. Make sure that you have validity on the. On the strategy that's being presented to you. So when we work with clients, before we implement the strategy, we have an advisory report, and on that advisory report, we're going to cite every tax code that we're going to be leveraging. Once the client has clarity on exactly what's a tax code, what is the tax incentive that's going to be leveraged, then that is going to be part of the tax plan and then the tax plan is then going to be implemented.
And finally the tax returns for the business individual are going to be prepared and filed. Right. So we start with advisory report that adds validity to it gets validated and then it gets implemented and then it gets executed.
[00:21:18] Speaker B: And then how do you stay up to date on the ever changing landscape of international tax law? What resources do you recommend for others?
[00:21:25] Speaker A: We are part of the CPA Society in Puerto Rico as well as in the U.S. right. So we are, we are constantly learning and getting up to date on the tax law, both in Puerto Rico as well as in the U.S. right. Our team, one of our senior managers and all enroll agents. We do presentations internally, at least on a monthly to quarterly basis. And then of course every year we have to participate on continuing education in order for us to keep our licensures. Right. So, but not only that, I'm always reading, I'm always catching up with news, international news and so forth.
In a couple of weeks I'm going to be in Kuala Lumpur on a important international conference for entrepreneurs and investors. There's going to be a high level of taxation there. So there I'm going to be catching up on international tax affairs and so forth. So it's important for me to put time into it. So it's for my team.
[00:22:18] Speaker B: For business owners considering a move to Puerto Rico, what are the first steps they should take to ensure a smooth transition and compliance with local regulations.
[00:22:27] Speaker A: I would suggest to have a conversation with the experts, people who know the tax law, both in Puerto Rico as well as in the US you want to make sure that your documents get reviewed, you want to make sure that you have a plan.
This is how I'm going to set up my bank accounts. This is how I'm going to set up my business license. This is how I'm going to be setting up my accounting system. This is how my taxes in the future are going to be looking like what's my tax projection and so forth.
The reason you want to know that is because you don't want to worry about it. You don't want to worry about that. You want to worry less about that and then only put attention to what's important for you, which is your business activity or your investment activity. So when you partner with a provider, service provider, make sure that you have A solid plan that you understand how the future might look like that way, the only thing you need to focus on is on, you know, in your case, like family matters, as well as making sure that you're running your business effectively.
[00:23:32] Speaker B: What trends do you see in global emerging and global mobility tax planning? How is your CPA firm dilemma CPA preparing to address them?
[00:23:41] Speaker A: We're seeing more and more with technology and the way people are obtaining information. People are, are more savvy people, people are having more information. People are more aware of like taxation in different jurisdictions. Like if it's in South America, is it in the Middle East, Is it in Puerto Rico, is it in the Caribbean? Like where is it? Right. So I'm seeing more and more nomads. I'm seeing more and more people that are going independent, right. And taking ownership of their finances by being self employed, by looking into how is it that they can improve their personal economic situation, if you will. Right. So we are highly aware of that. I am highly aware of that. I need to make sure that I'm understanding the nature of those individuals. I need to understand how is it that they think.
By understanding how is it that they think and by having my level of expertise that I'm able to help them, I'm able to work with them. It's a matter of understanding demographic changes and then understanding how the tax law, Puerto Rico, U.S. international is evolving. So then I'm able to pair the two of them.
[00:24:57] Speaker B: Last question.
Because, you know, even though you're saving people a lot, I can't imagine that this is easy to do. You know, all this strategization and the cost involved of relocating in Puerto Rico and all that. How much would you say this investment takes to do this? You know, you are tired of paying taxes, you want to move from California to Puerto Rico.
[00:25:19] Speaker A: Yeah.
[00:25:20] Speaker B: Establish a business and everything moves, Move everything. How much would you say people on average are spending to kind of just make this big move?
[00:25:30] Speaker A: Yeah. So it all depends. So for example, let me give you a holistic perspective, if that's okay with you. Right.
So my team, right. So we have of course a customer service department, we have a concierge department. And then we have managers that are going to be walking through the clients from start to finish on this journey. Right. So we have a whole division of our company that specializes in taking care of the clients. Right. That's the number one thing. Like you need to make sure that you have a solid team that's working with you. Right. And understand your situation. Because this Is it's like a family matter. It's like a very sensitive matter. It's like a very personal matter, right? So you want to make sure that you have the right team working with you. Okay?
Second, you're saying, okay, so how is this, I guess you're asking me how is this going to cost an individual, business owner, etc. Right? Like when, when does it make sense? Right?
So it's on a case by case basis. It all depends, right? So we have situations, like I explained to you earlier, we're helping a client save $800,000, another 1, 700, another 1, half a million in some instances, quarter million in some instances, million plus, year over year.
So then question is, what's your number? When does it make sense to you?
[00:26:51] Speaker B: Right?
[00:26:51] Speaker A: It's a very individual question. When does it make sense to you? Does it make sense to you at a quarter million? Does it make sense to you at 100,000? Do you want to have a dual lifestyle? You want to have a place in Puerto Rico, be in Puerto Rico for six months and have a place in the US and then the same time, say quarter million dollars, half a million dollars, and you have like this amazing lifestyle, right? It all depends, right? And we have, in our spectrum of clients, we have, you know, we have a little bit of everything, everything, if you will.
[00:27:24] Speaker B: How hard is it to establish a medical practice in Puerto Rico? From what I know, you know, the doctors there, actually a lot of them are doing better than they're doing here. How different is it, you know, what's the demand? Like, what's the market like?
[00:27:39] Speaker A: Yeah, it all depends on your specialty. And it all depends on like what is it that you're going to be doing for your patients. For your patients. Are you going to be taking care where exactly you're going to be taking care of your patients, right?
It also depends on like how open minded you are. It's not that you have the expertise in your current specialty, right? But you need to also take a look at it from the business perspective. Like, are you, how are you going to market, how are you going to make sure that you, your patients are sticky, right? I would say you're going, you're going to differentiate yourself. Like you have to work it, right? It's not like you're going to move to Puerto Rico and you are going to have a website and here we go and you know, it's going to balloon. Hopefully that's the case.
But in reality, right, you have to understand your market, you have to understand your business you have to understand your ocean, if you will. Are you going to have a red ocean or you're going to have a blue ocean? Right.
And then go at it. Right. And then the benefit of it is that you're going to have a very low taxation. That's one of them. And then that's just going to be part of your journey. Right. So it all depends. But yeah, you need to make sure that you have your license, you need to make sure you have your proper registration, that you are allowed to conduct business and so forth. And that's one of the areas in which we can add value to doctors that are going to be or considering relocated to Puerto Rico.
[00:29:08] Speaker B: And then what is the youngest person or client that you have helped? I myself know teens that have moved to Puerto Rico, entrepreneurial teens.
And what's the craziest sort of business model?
[00:29:21] Speaker A: Yeah, yeah, we, it's funny you asked that, but yeah, we, we're working with a, an individual who's like 17 years old and he's making a killing.
We have a bunch of investors and a bunch of online entrepreneurs in their 20s. We have a lot of people in their 30s, we have people in their 40s, we have people in their 50s. So it all depends on the spectrum, on exactly what is it that you do.
If you were born already with, when you were born, you are given an iPad and a phone, you see the world differently and you see the opportunities.
You see different opportunities. If you were more, call it in the 70s or 80s just because. Right.
So it's a whole different world, It's a whole different generation and so forth. Right. So so often kids, you know, they're 12, 14, 15, 16, 17, they're making hundreds of thousands or even millions of dollars. Right. And the parents do not know what to do with them. Right. So they hire their parents as managers sometimes. Right. Which in this case.
So yeah, to answer your question, Dr. Chagon, yeah, we see it's a very interesting spectrum in demographics, if you will.
[00:30:31] Speaker B: Anything else you want to say for our audience?
[00:30:33] Speaker A: Yeah, of course. So, Dr. Chekhon, thank you so much for allowing me to speak to you today.
It's been great. Hopefully this information is going to be of benefit not only to you, but also to your audience, not only now, but in the future.
Physicians and doctors that would like to get more information and how to get in touch with us. We have a couple of websites, so pr-taxincenses.com and cpadocs.com cpafordocs.com so we have those two. And then on Instagram, look at Victor Delarme and you'll see more information about me.
