> I know a very wealthy hedge fund manager who just moved to PR in order to minimize (read: eliminate) his Federal tax burden.
Based on a couple of minutes of reading from wikipedia ( https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico ), it sounds like the federal income tax is only eliminated as to income from sources in Puerto Rico. If your income is mostly capital gains from your vast stockholdings, what's the "source"? How exactly is this working? Do you have to be invested exclusively in stocks listed in Puerto Rico? (Do those exist?) Do you have to be exclusively invested in Puerto Rico government bonds? Is his hedge fund incorporated in Puerto Rico, and that's enough?
Shell companies are your friend. You can move a lot of money around faster than the authorities can follow the paper trail in many cases. That's why some people refer to delaware as the world's biggest tax haven - Delaware is extremely friendly to corporations and it's trivially easy to set one up. So if you are skilled in the technicalities of company formation and business administration, you can make your audit trail very difficult to follow.
Based on a couple of minutes of reading from wikipedia ( https://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico ), it sounds like the federal income tax is only eliminated as to income from sources in Puerto Rico. If your income is mostly capital gains from your vast stockholdings, what's the "source"? How exactly is this working? Do you have to be invested exclusively in stocks listed in Puerto Rico? (Do those exist?) Do you have to be exclusively invested in Puerto Rico government bonds? Is his hedge fund incorporated in Puerto Rico, and that's enough?