Act 60 Puerto Rico: The Complete 2026 Guide to Tax Incentives, Benefits, and Requirements

If you’ve been exploring ways to legally reduce your tax burden, Act 60 Puerto Rico is probably one of the most powerful tools you’ve come across. But what exactly is it? In simple terms, Act 60—also known as the Puerto Rico Incentives Code—is a comprehensive law that consolidates multiple tax incentive programs into one unified framework.

Before Act 60 was introduced in 2019, Puerto Rico had several separate laws like Act 20 (Export Services) and Act 22 (Individual Investors). These programs were highly effective but somewhat fragmented. Act 60 streamlined them, making it easier for individuals and businesses to apply, comply, and benefit from tax incentives without navigating multiple systems.

Think of Act 60 as a “one-stop shop” for tax benefits. Instead of juggling different regulations, you now deal with a single, integrated code. This simplification has made Puerto Rico even more attractive to entrepreneurs, investors, and digital nomads looking for tax efficiency without leaving U.S. jurisdiction.

Why Puerto Rico Created Act 60

Puerto Rico didn’t create Act 60 randomly—it was a strategic move to revive and strengthen its economy. After years of financial struggles, the government needed a way to attract outside capital, talent, and businesses. The solution? Offer some of the most competitive tax incentives in the world.

By encouraging wealthy individuals and companies to relocate, Puerto Rico benefits from increased spending, job creation, and investment in local infrastructure. In return, participants enjoy significantly reduced taxes. It’s a win-win scenario that has turned Puerto Rico into a hotspot for global investors.

Key Tax Incentives Under Act 60
Export Services Incentives

One of the most popular components of Act 60 is the Export Services Incentive (formerly Act 20). This program targets businesses that provide services to clients outside Puerto Rico.

If you run an online business, consulting firm, marketing agency, or software company, this incentive can be a game-changer. Eligible businesses can enjoy a corporate tax rate as low as 4%, which is dramatically lower than mainland U.S. rates.

Imagine running a global business but paying only a fraction of the taxes you’d normally owe. That’s exactly what Act 60 offers. However, you must establish a real presence in Puerto Rico, including office space and local employees, to qualify.

Individual Investors (Former Act 22)

The individual investor portion of Act 60 is what grabs most headlines—and for good reason. It offers 0% tax on capital gains, dividends, and interest income under specific conditions.

For investors, traders, and crypto enthusiasts, this is incredibly powerful. You can grow your wealth without the constant drain of taxes eating into your profits. But remember, these benefits apply primarily to income sourced in Puerto Rico and require strict compliance with residency rules.

Manufacturing and Other Incentives

Act 60 doesn’t stop at services and investments. It also includes incentives for manufacturing, tourism, renewable energy, and more.

For example, manufacturers may receive reduced tax rates and exemptions on certain imports and property taxes. This encourages companies to set up operations on the island, boosting employment and economic activity.

Tax Benefits Explained
Corporate Tax Rate Advantages

Let’s talk numbers. Under Act 60, eligible businesses can benefit from a fixed corporate tax rate of 4%. Compare that to U.S. federal corporate tax rates, which can exceed 21%, and you start to see the appeal.

This isn’t just a small discount—it’s a massive reduction that can significantly increase your profit margins. Over time, these savings can be reinvested into your business, accelerating growth.

Capital Gains and Dividend Exemptions

For individuals, the highlight is the 0% tax on certain capital gains and passive income. This means you can sell investments or earn dividends without paying local taxes in Puerto Rico.

However, timing matters. Gains accrued before becoming a resident may be treated differently, sometimes subject to reduced rates instead of full exemption. Strategic planning is key here.

Federal Tax Considerations

Even though Puerto Rico is a U.S. territory, its tax system operates differently. Under federal rules, Puerto Rico-sourced income can be excluded from U.S. federal taxes if you qualify as a bona fide resident.

This is what makes Act 60 so unique. It allows U.S. citizens to legally reduce both local and federal taxes—something that’s nearly impossible elsewhere without renouncing citizenship.

Eligibility Requirements
Bona Fide Residency Rules

To unlock Act 60 benefits, you must become a bona fide resident of Puerto Rico. This involves passing three critical tests:

Physical Presence Test

You need to spend at least 183 days per year in Puerto Rico. This ensures you’re genuinely living there and not just claiming residency for tax purposes.

Tax Home Test

Your primary place of business or employment must be in Puerto Rico. This ties your economic activity to the island.

Closer Connection Test

You must demonstrate stronger ties to Puerto Rico than any other location. This includes your home, family connections, and financial accounts.

Business Qualification Criteria

If you’re applying as a business, you must provide services primarily to clients outside Puerto Rico. Additionally, you’ll need to hire local employees and maintain an operational presence on the island.

Application Process
Step-by-Step Application

Applying for Act 60 involves several steps:

Submit an application through Puerto Rico’s incentives portal
Provide detailed financial and business information
Undergo background checks
Receive a tax exemption decree upon approval

This decree is essentially your contract with the government, guaranteeing your tax benefits for a set period—often up to 15–20 years.

Costs and Fees

Expect to pay application fees, legal costs, and annual compliance fees. While these expenses can add up, they are usually small compared to the tax savings achieved.

Compliance and Ongoing Obligations
Annual Reports and Filings

Once approved, you’re not done. You must file annual reports to maintain compliance. Missing deadlines can result in penalties or loss of benefits.

Job Creation and Economic Impact

Businesses must contribute to the local economy by creating jobs. This requirement ensures that Act 60 benefits Puerto Rico, not just participants.

Charitable Contributions

Individual investors are required to make annual donations to Puerto Rican charities. This adds a social responsibility component to the program.

Advantages and Disadvantages
Benefits of Act 60
Benefit    Description
Low Taxes    Corporate rates as low as 4%
Capital Gains    0% tax for qualified residents
Stability    Long-term tax decrees
U.S. Jurisdiction    Legal and secure environment
Risks and Challenges
Challenge    Explanation
Relocation    Must physically move to Puerto Rico
Compliance    Strict reporting requirements
Costs    Legal and setup expenses
Complexity    Requires professional tax planning
Who Should Consider Act 60?
Entrepreneurs and Remote Businesses

If you run an online or service-based business, Act 60 can significantly reduce your tax burden while allowing you to operate globally.

Investors and High-Net-Worth Individuals

Investors benefit from capital gains exemptions, making Puerto Rico one of the most attractive jurisdictions for wealth growth.

Recent Updates and Future Outlook
Changes in 2025–2026

Recent updates have tightened compliance requirements, including stricter residency verification and increased transparency. These changes aim to ensure that only genuine residents benefit from the program.

Long-Term Stability of Incentives

One of the biggest advantages of Act 60 is its stability. Once you receive a decree, your tax benefits are generally protected for years, even if laws change for new applicants.

Conclusion

Act 60 Puerto Rico isn’t just another tax incentive—it’s a complete system designed to attract global talent and investment. Whether you’re an entrepreneur, investor, or business owner, it offers opportunities that are hard to find elsewhere. But it’s not a casual decision. It requires planning, commitment, and a willingness to embrace a new lifestyle.

FAQs
1. Is Act 60 better than Act 22?

Act 60 includes Act 22 benefits along with many others, making it more comprehensive.

2. How long do tax benefits last?

Typically between 15 to 20 years, depending on your decree.

3. Can remote workers qualify?

Yes, if they provide services to clients outside Puerto Rico.

4. Do I need to buy property?

Yes, in most cases you must establish a primary residence in Puerto Rico.

5. Is Act 60 legal for U.S. citizens?

Yes, it is fully legal and recognized under U.S. tax law.