Act 60 benefits are powerful, but they’re not automatic. You must meet strict legal and tax requirements to enjoy them.
Let’s break everything down clearly and simply.
What Is Act 60 in Puerto Rico?
Puerto Rico Act 60 — officially called the Puerto Rico Incentives Code — consolidated former Acts 20 and 22 into one unified law in 2019.
It provides:
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4% corporate tax for export services
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0% tax on certain capital gains
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100% dividend exemptions
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Additional industry-specific incentives
But qualifying requires meeting specific residency, business, and compliance requirements.
Act 60 Residency Requirements (Individual Investors)
If you’re applying for individual tax benefits (formerly Act 22), you must meet the Bona Fide Resident Test under U.S. tax law.
This includes three major tests:
1. The 183-Day Physical Presence Test
You must spend at least 183 days per year physically in Puerto Rico.
Alternative calculation methods exist, but 183 days is the safest rule.
Miss it? You likely lose your status.
2. Tax Home Test
Your primary place of business (or employment) must be in Puerto Rico.
You cannot maintain your main tax home in the mainland U.S.
3. Closer Connection Test
You must demonstrate stronger ties to Puerto Rico than to the U.S.
This includes:
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Primary residence in Puerto Rico
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Puerto Rico driver’s license
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Voter registration
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Local bank accounts
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Community involvement
The IRS looks at the total picture.
Act 60 Capital Gains Requirements
For investors seeking 0% capital gains tax:
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Gains must accrue after becoming a Puerto Rico resident
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You must hold a valid Act 60 decree
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You must comply annually
Pre-Move vs. Post-Move Gains
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Gains accrued before moving may still be taxed federally
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Only post-residency appreciation may qualify for 0% Puerto Rico tax
Timing is everything.
Act 60 Export Services Requirements (4% Corporate Tax)
If you’re running a business, different rules apply.
To qualify for the 4% corporate tax rate, your company must:
1. Provide Eligible Export Services
Services must be provided from Puerto Rico to clients outside Puerto Rico.
Eligible services include:
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Consulting
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Marketing
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Software development
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Financial services
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Crypto services
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Investment advisory
The key: the income must be export-based.
2. Establish a Puerto Rico Entity
You must form a Puerto Rico legal entity, typically:
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LLC
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Corporation
The entity must operate from Puerto Rico.
3. Maintain Local Substance
Substance is critical.
You must:
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Maintain a physical office in Puerto Rico
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Open local bank accounts
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Hire at least one Puerto Rico employee (usually required)
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Conduct business activity from the island
Paper companies don’t qualify.
4. Pay the Required Application Fees
Application fees generally include:
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Government filing fees
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Annual report fees
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Compliance fees
Additionally, there is typically an annual charitable contribution requirement.
Act 60 Application Process Requirements
To receive benefits, you must:
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Submit application to Puerto Rico’s Department of Economic Development
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Receive an official tax decree
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Register with Puerto Rico Treasury
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File annual compliance reports
Benefits do not apply retroactively unless approved.
Annual Compliance Requirements
Once approved, you must:
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File Puerto Rico income tax returns
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File annual reports
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Submit compliance certifications
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Maintain residency requirements
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Pay annual fees
Failure to comply can result in revocation.
Charitable Contribution Requirement
Individual investors must:
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Donate a minimum annual amount (currently required under law)
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Contribute to Puerto Rico-based nonprofit organizations
This supports the local economy and community.
Property Purchase Requirement (For Individuals)
Recent amendments require:
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Purchase of residential property in Puerto Rico
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The property must become your primary residence
Renting may not be sufficient under current rules.
Federal Tax Reporting Requirements
Even if you qualify for Act 60:
You must still:
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File U.S. federal tax returns
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Report worldwide income
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File Form 8898 (initial year)
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Comply with FBAR and FATCA rules
Puerto Rico tax benefits do not eliminate federal compliance.
Common Mistakes That Disqualify Applicants
Many applicants fail because they:
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Spend fewer than 183 days in Puerto Rico
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Keep stronger ties to a U.S. state
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Fail to hire employees
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Do not maintain real operational substance
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Misunderstand capital gains timing
Act 60 is generous — but strict.
How Long Do Act 60 Benefits Last?
If approved, tax decrees often last through 2035 (depending on issuance date), offering long-term certainty — provided you remain compliant.
Is Act 60 Still Worth It in 2026?
For:
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Entrepreneurs
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Crypto investors
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Remote service businesses
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High-net-worth individuals
Yes — if structured properly.
But it is not a shortcut.
It is a relocation strategy that requires full commitment.
Final Thoughts on Act 60 Puerto Rico Requirements
Act 60 offers one of the most powerful tax incentive structures available to U.S. citizens.
But the benefits only apply if you:
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Truly relocate
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Meet strict residency rules
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Establish business substance
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Maintain annual compliance
Think of Act 60 like a membership club.
The rewards are exceptional.
But you have to qualify — and stay qualified.
FAQs
1. Do I need to live in Puerto Rico full-time?
You must meet the 183-day requirement and satisfy residency tests annually.
2. Is crypto tax-free under Act 60?
Post-residency capital gains may qualify for 0% Puerto Rico tax if structured correctly.
3. Do I still file U.S. taxes?
Yes. U.S. citizens must file federal returns regardless of residency.
4. Can I operate my business remotely from the U.S.?
No. The business must operate from Puerto Rico to qualify.
5. What happens if I fail compliance?
Your tax decree can be revoked, and taxes may be reassessed.
