Wednesday, 27 April 2016

I've been reading: "Puerto Rico, The Puerto Rico Section 936 Funds Order, 1990 "

Over the last few days in an attempt to bolster my knowledge on taxes, I was browsing  some of the treaties and Tax Information Sharing Agreements to which  Trinidad and Tobago is a party. Being one of those who start to read a book from the back to see how it ends before I start reading the book, I came across "The Puerto Rico Section 936 Funds Order, 1990 and  the Tax Information (Declared Agreement) Order 1990 between the United States of America and Trinidad and Tobago. The Tax Information Order came into effect on 9th February,1990 was called The Tax Information Exchange Agreement Act, 1989 in Trinidad and Tobago.
However one of the main points of the Puerto Rico Section 936 Funds Order is as follows:
 #2 "Withholding tax applicable to income derived from Puerto Rico Section 936 Fund investment is reduced from 30 percent to .001 per cent." While I have not checked to see if this agreement was modified or if it was "retracted," if that is what is done to agreements which may not appeal to the public any longer, if I held funds in Puerto Rico under the "Section 936 Funds Order"  or otherwise, unless there was a restriction as to the use of funds internally, I would consider doing the following:
  1. Ascertain where Puerto Rico, being defined as a territory of the USA, falls under "Avoidance of Double Taxation Treaties between the USA and other countries.  See the  link  to  and the extract from to the following article  which highlights the concepts re Section 936 Investment Order: "Puerto Rico is in worse shape than you think — and US bankers aren't helping" "Because Puerto Rico is a territory and not a state, it remains "foreign to the United States in a domestic sense." Oliver didn’t have any interest in settling the contentious topic of Puerto Rico statehood, but focused instead on how problematic it is that many state laws have loopholes on the island. ... One law that created an abundance of wealth in Puerto Rico was Section 936, a tax break that was given to businesses to encourage them to set up shop in Puerto Rico instead of moving overseas."
  2. Once the definition of the tax status of Puerto Rico is clarified (in light of "Section 936 Funds Order"), it would allow:
    • Individuals and countries to explore which set of withholding tax rates they are to use when complying with the treaties and the movement of funds into and out of Puerto Rico. This would allow them to remain tax compliant.
    • Investment choices such as the rental of land, property in Puerto Rico  as these are all business concepts which involve withholding tax and which impact on the choices which an investor can make.
  3. If there are no restrictions and the "regular rates of withholding tax" are being adhered to, then being a small investor and being in support of persons who live and reside in Puerto Rico, I would:
    • Rent the land surrounding a person's home and plant  green bananas, plantains, and fruit trees. While this would not be done on a large scale, I would export the short term and longer term crops to near by islands. If ten such properties in each area are being rented, while persons look at the returns of such a project and develop the skills needed to make this type of investment successful, this would benefit the island as Puerto Rico is located in the middle of a number of small islands and there are boats moving up and down these islands which would facilitate the movement of the goods.. Yes agriculture is labor intensive, however if I do not sell it, I can eat it, so plant what you would like to eat.... In this day and age, I am not looking at major investments as the country, being located in a tropical area in the midst of climate change, my crops would be exposed to weather forces which are relatively unpredictable. Thus I would need to manage my risks...
    • I may not have a lot of competition with this type of project in the Puerto Rico location as unlike the Cayman Islands where  because of my geographical location I am facing competition from the agriculture rich Cuba and Jamaica,
  4. Consider eco tourism, which may be impacted upon by withholding taxes. However in light of the recent Paris climate agreement it may be easier to rethink our residential choices and let certain geographical areas rest, while we look at the impact of achieving milestones as identified in the  following extract " The US, for example, has pledged to reduce emissions 26% below 2005 levels by 2015; the European Union is aiming for 45% below 2005 levels by 2030. China hopes to reach the same target by 2020. 
    It also includes provisions designed to protect the global poor, who are almost certainly going to bear the brunt of the warming sparked by the rapid industrialization of other, richer countries.
    This includes allocating funding from wealthy states to developing ones as well as committees tasked with exploring solutions to issues like the inevitability of climate refugees.( See the following link: 
  5. The story which is accessed via the link represents one of the best short term options which can impact positively on  climate/ temperature control in streets and in other areas, developing community spirit  and inculcating a sense of social responsiblility, corporate or otherwise. 

    "Food Street: Feeding off the kerbside and creating close communities

     Disgruntled over the price of a lime, two Queensland locals have started Australia's first integrated, edible streetscape in a bid to live a simple organic lifestyle of community and fresh food.
    Urban Food Street began in 2009 in the leafy green Sunshine Coast suburb of Buderim, and now acts as a blueprint for the nation to give purpose to the great Australian nature strip.
    "It started with us deciding to plant limes, and then it evolved into this notion that if we put the limes out on the nature strip people could pick a lime for whatever they need it for," graduate architect and one of the masterminds behind Urban Food Street, Caroline Kemp said."
© Jennifer Bailey

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