The St. Regis Bahia Beach Resort is located in a master-planned community situated on 483 acres about 25 minutes east of San Juan’s Luis Muñoz Marín International Airport. In addition to the 139-room St. Regis hotel, the community features luxurious oceanfront and oceanview villas and golf and ocean view condominiums, a 2-mile beach and 18-hole golf course designed by Robert Trent Jones Jr.

Since the first homes were built in 2007 by BBP Partners (BBP) – a joint venture between two of Puerto Rico’s leading real estate developers, Interlink Group and Muñoz Holdings – more than $125 million worth of residences have been sold at the resort and the $150 million St. Regis Bahia Beach Resort opened in 2010.

Paulson is acquiring a majority interest in Bahia Beach through a comprehensive recapitalization. The firm has roughly $18 billion under management and has offices in New York, London and Hong Kong.

“The St. Regis Bahia Beach resort is already one of the premier leisure travel destinations in the Caribbean, and there is increasing demand from both those looking to purchase holiday homes in Puerto Rico and from those living in or moving to the island,” said Paulson, founder and president of Paulson & Co.

“We look forward to working with Paulson to continue the successful development of Bahia Beach,” said Federico J. Sánchez-Ortiz, president and CEO of Interlink Group. “We have an exciting vision for the project and plan to develop another $500 million of residences and resort amenities over the next decade. The future bodes well for Bahia Beach and our property owners and club members.”

Paulson rose to fame in 2007 with a successful bet that subprime mortgages would tumble. The wager produced $15 billion in profits for his hedge fund and turned him into one of the 100 richest people in the world, with an estimated wealth of $11.2 billion as of last week, according to the Bloomberg Billionaires Index.

The deal announced Monday comes after the New York firm’s founder John Paulson made headlines several months ago with reports saying the billionaire hedge fund heavyweight was considering moving to Puerto Rico.

As CARIBBEAN BUSINESS online reported in March, Paulson said Puerto Rico’s tax bait aimed at luring wealthy new residents would not lure him away from the Big Apple, but his company was considering real estate investments on the island.

Paulson, 57, could have joined the ranks of a small, but growing number of wealthy mainlanders to take advantage of tax laws passed by the previous administration of former Gov. Luis Fortuño aimed at getting high net worth individuals to relocate to Puerto Rico.

Law No. 22 of 2012, also known as the Individual Investors Incentives Act (Law 22), provides tax exemptions to eligible individuals residing in Puerto Rico, and may have profound implications for the continued economic recovery of the island. To avail themselves of such benefits, individual investors need to become residents of Puerto Rico and apply for a tax-exemption decree, which has generated interest from many investors as well as criticism from detractors.

Law 22 is designed to primarily attract to Puerto Rico high-net-worth individuals, empty nesters, retirees who currently relocate to other states and individual investors from the U.S. and other countries, by eliminating all taxes on passive income that accrues after they relocate to the island. While dividends and interest income earned by Puerto Rico residents on U.S. securities are generally taxed by the federal government, capital gains taxes on their sales are based on residence.

Another lure, Law 20, aims to promote the export of services from the island, while also attracting professionals to the territory by reducing the corporate tax rate to 4 percent on service export revenue.

Both of these laws were signed by Fortuño in early 2012, but hadn’t yet been aggressively marketed and promoted until the new administration of Gov. Alejandro García Padilla and Economic Development & Commerce Secretary Alberto Bacó started doing so after taking office in January.

Puerto Rico’s unique political status — under the jurisdiction of the U.S. but with a separate tax system — makes this pitch particularly attractive to wealthy investors residing stateside. U.S.-based millionaires and billionaires who move to the island would avoid taxation on the sale of securities, which are normally taxed federally at a 23.8 percent rate.

The Puerto Rico program has an advantage over foreign jurisdictions because investors don’t have to renounce their citizenship to take advantage of the tax-shelter offer. Wealthy taxpayers who opt to re-establish overseas to a foreign country have to surrender their U.S. passports and pay an exit tax of 23.8% on unrealized capital gains.

The unique interplay between the U.S. and Puerto Rico tax systems is creating this powerful tax lure, offering a way to avoid federal taxes on unrealized capital gains that even foreign jurisdictions don’t offer investors. However, it is the interaction between those two systems that have many predicting a backlash will occur in Congress, state governments and the Internal Revenue Service.

Source: caribbeanbusinesspr.com | Article: Monday, September 23, 2013