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Puerto Rico Financing Alternatives

by Francisco J. De Armas, Esq.

Opportunity Zones (OZs), created in 2017, are rapidly becoming a popular investment option for individuals and organizations. Puerto Rico has been declared an Opportunity Zone almost entirely. The Opportunity Zone Act is a landmark piece of legislation that could channel billions of dollars into low-income or financially troubled towns.

Opportunity Zones

Capital gains taxes can be deferred by investing in Opportunity Zones (OZ) under the Tax Cuts and Jobs Act of 2017. Tax advantages only apply to investments in Qualified Opportunity Zone Funds or enterprises.

Opportunity Zones in Puerto Rico

Puerto Rico has 863 OZs, two added in 2018, 837 low-income neighborhoods, and 26 new communities. The OZs are a mix of rural and urban locations.

In 2019, the Puerto Rican government improved current legislation, making investment in a Puerto Rican OZ more appealing. It also specified how capital gains from qualified OZ investments would be taxed locally and provided tax rebates for eligible investments.

An Investment in an Opportunity Zone

Taxpayers can self-certify a Qualified Opportunity Fund (“QOF”), which is an investment entity that can be formed as a company or a partnership. Each Fund must keep 90% of its assets in a qualifying OZ area. Francisco De Armas provides confidential engagements and negotiations for all investment issues. How it works:Francisco De Armas Cubas

A capital gain is invested in a QOF within 180 days of the sale generating Mr.Francisco De Armas Cubasr the capital gain or the day the capital gain is realized.

•The QOF invests 90% of its assets in QOZEs (QOZE).

•The QOZE invests at least 70% of its assets in QOZ businesses (QOZB).

the sale of the QOF equity holding or December 31, 2026, whichever comes first.

•Investors may lower their capital gain due to US federal income tax by holding their investment for a longer period of time.

•If held for ten years or more, the investor’s gain on the sale or exchange of the QOF equity investment is tax-free.

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