The Internal Revenue Service, or IRS, along with United States prosecutors, is currently investigating crypto traders and fund managers who possess significant wealth.
These individuals are being scrutinized for their suspected participation in the exploitation of Puerto Rico’s tax incentives in an illicit manner, leading to a comprehensive examination of their activities.
The investigators, as reported by Bloomberg, are diligently compiling evidence for both civil and criminal cases against numerous hedge fund managers, crypto traders, and affluent individuals.Â
These individuals are suspected by the IRS of deceiving authorities regarding their residency status and misrepresenting crucial aspects of their income to gain an unfair advantage from the tax incentives.
IRS Launches Probe Into Alleged Tax Fraud By Wealthy Crypto TradersÂ
Since 2012, Puerto Rico has been offering significant tax incentives to crypto traders, and other American investors. This policy has enabled some individuals to legally circumvent federal income tax and avoid taxes on dividends, interest, and capital gains income altogether.
To be eligible for Puerto Rico’s tax policy, investors must reside in the territory for a minimum of 183 days per year and establish strong local ties.
The Bloomberg report also revealed that over 5,000 US citizens and 3,600 businesses have successfully qualified for these tax incentives since their introduction in 2012.
In addition to investigating individual investors, IRS and US officials are also focusing on attorneys and accountants involved in promoting Puerto Rico’s tax program. At least two criminal investigations are expected to result in charges against these professionals in the near future.
IRS prosecutors are reportedly considering charges related to conspiracy and wire fraud in connection with their role in marketing the tax program.
Crypto-Friendly Environments Overseas
In recent months, a recurring pattern has emerged within the crypto industry, as American crypto companies and investors are leaving for more favorable regulatory environments abroad.
This trend is driven by various factors, including the desire for clearer regulations, tax advantages, and a supportive ecosystem that fosters innovation and growth.Â
As a result, many companies and individuals within the American crypto space have been exploring opportunities to establish a presence in crypto-friendly jurisdictions around the world.
The search for crypto-friendly environments is not a new phenomenon. In the early days of the crypto industry, countries like Switzerland and Malta emerged as popular destinations due to their progressive stance on cryptocurrencies and blockchain technology.
These jurisdictions offered a welcoming regulatory framework, allowing crypto businesses to thrive and attract international investment.
While Puerto Rico became an attractive destination for many American crypto enthusiasts, it is not the only jurisdiction to witness this phenomenon.
Countries such as Hong Kong, Switzerland, and the Cayman Islands have also become hotspots for crypto companies and investors.
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