In 2012, Puerto Rico enacted law 22, or the Individual Investors Tax Act, in an effort to bring high net worth individuals to the island. The goal is to have them invest in the local economy and help pull it out of it’s 8-year and counting recession. The law creates a tax haven for investors and traders, once they become bona fide residents, by allowing them a 100% tax exemption on all dividends, interest and short-term and long-term capital gains on income earned in Puerto Rico.
To date, about 300 individuals have taken advantage of the law and have moved lock, stock and barrel to Puerto Rico. The average net worth of these individuals is roughly $7 million, although there are one or two billionaires in there. So if you invite a whole bunch of wealthy people to upend their comfortable lives and help you re-start your economy, what can a country do to ensure a positive customer experience? Because that is what these migrants essentially are: customers.
This type of customer is every entity’s dream. And their nightmare. Yes, this customer has more money than they know what to do with. But because of precisely that, they may be the hardest customer to keep happy.
All kinds of companies have stepped up to the plate to assure the newly minted Puerto Ricans that they can replicate their lives here. Sotheby’s opened a real estate office here. Government officials set up a conference to educate them about private schools, recreational activities, the arts and philanthropic opportunities. Beachside towns, such as Dorado, have pulled out all the stops to lure the island’s latest immigrants to their communities. The settler’s themselves have set up their own non-profit organization, The 20/22 Act Society, to foster a sense of community amongst other individuals and entities coming to PR for the tax incentives.
Will the government’s experiment to bring in a few hundred millionaires have a significant impact on the Puerto Rican economy? Will they be able to provide their new found citizens with the kind of “customer experience” that will help them adapt and flourish? They may have come here for the tax breaks, but how much of their lifestyle are they willing to give up in return? Only time will tell.
A significant part of the equation will depend on how happy they are living their lives here. The government can try very hard to entice them to remain in Puerto Rico by cutting their tax burden. Still, there’s that old “money can’t buy happiness thing”. And in the end, if they aren’t happy, they might just start remembering the words of Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.”