1. What is Puerto Rico Act 60?

Act 60, also referred to as the Puerto Rico Incentives Code, is a legislative framework designed to consolidate and streamline various tax incentive programs that previously existed under different statutes, most famously Acts 20 and 22. By creating a single, cohesive code, Act 60 aims to stimulate economic growth, generate job opportunities, and attract both businesses and individuals to Puerto Rico through a range of favorable tax structures.

Before Act 60’s enactment in 2019, investors and businesses often had to navigate an array of separate laws to access Puerto Rico’s tax benefits. Now, the incentives that apply to export services, manufacturing, creative industries, and more are organized under one umbrella. This simplification makes it easier for newcomers and existing businesses to take advantage of lower tax rates, capital gains exemptions, and other financial perks designed to bolster the island’s economic development.

2. What are the main benefits of Act 60?

One of the key appeals of Act 60 is its array of tax incentives for qualifying individuals and corporations. These benefits often include reduced corporate income tax rates—sometimes as low as 4%—as well as exemptions or lower rates on dividends, interest, and capital gains for residents. Additionally, some companies that offer services primarily to clients outside of Puerto Rico can benefit from significant reductions in their overall tax burdens.

On a personal level, Act 60 provides attractive incentives such as the possibility of 0% capital gains tax for bona fide residents who qualify, making Puerto Rico particularly enticing to investors, traders, and entrepreneurs. Combined with the island’s strategic location and cultural richness, Act 60’s benefits can make Puerto Rico an appealing destination for those looking to optimize their tax structures without sacrificing lifestyle.

3. Who is eligible for Act 60 incentives?

Act 60 eligibility extends to both individuals and businesses. Individuals who aim to reduce their personal tax obligations—such as investors, traders, or remote workers—must become bona fide residents of Puerto Rico by meeting the island’s residency requirements. On the corporate side, companies that render export services, engage in manufacturing, or operate within creative and technological industries may qualify for Act 60’s reduced tax rates, provided they meet the required conditions.

Some programs focus on startups, technology ventures, or R&D-driven businesses, while others are crafted specifically for professional service providers like consultants or financial advisors. Ultimately, eligibility hinges on satisfying the legal prerequisites related to residency (for individuals) or operational structure (for businesses). Properly understanding these requirements is key to unlocking Act 60’s substantial benefits.

4. What are the residency requirements under Act 60?

To qualify for Act 60’s personal tax benefits, individuals must establish “bona fide” residency in Puerto Rico. Generally, this involves spending at least 183 days per calendar year on the island, demonstrating a closer connection to Puerto Rico than any other jurisdiction, and ensuring that you do not have a tax home outside of Puerto Rico. This standard follows guidelines from both Puerto Rican and U.S. federal law to determine where you truly reside for tax purposes.

Meeting the 183-day rule alone is insufficient if you maintain stronger ties elsewhere, such as a permanent home or family base. Demonstrating residency also includes showing evidence of your daily life in Puerto Rico, such as where you keep personal belongings, vote, and participate in community activities. Failing to satisfy the residency criteria could jeopardize your tax benefits under Act 60.

5. Does Act 60 replace Acts 20 and 22?

In practical terms, yes. Act 60 absorbed and restructured the previous tax incentives under Acts 20 and 22 when it was passed in 2019. While existing decrees under those acts generally remain valid until their original expiration dates, new applicants will now apply under the provisions of Act 60. This unified code maintains many of the original benefits but aims to make the process more consistent across different industries and professions.

Current holders of Acts 20 and 22 decrees often maintain the same benefits they initially secured, so long as they stay compliant with all relevant requirements. However, these individuals or businesses may also explore whether transitioning to an Act 60 framework offers them any additional advantages. Consulting with a legal or tax professional can help navigate this transition effectively.

6. What types of businesses can benefit from Act 60?

A broad range of industries can qualify for Act 60 incentives. Export services—such as consulting, IT, marketing, and financial advisory—are among the most popular categories, as these businesses primarily serve clients located outside of Puerto Rico. Manufacturing companies, including those in the pharmaceutical or medical device sectors, also see significant reductions in tax liabilities under Act 60, helping them remain competitive.

Other sectors supported by Act 60 include tourism, hospitality, renewable energy, agriculture, creative industries (e.g., film production, music, and art), and technology-based startups. Each category may have specific requirements regarding capital investment, job creation, or operational benchmarks, so it’s important for business owners to verify that they meet all qualifying conditions.

7. What is the application process for Act 60?

The application process typically begins with gathering essential documents—such as financial statements, incorporation papers (if applying as a business), and any proof of Puerto Rican residency for individual applicants. Once you have the requisite paperwork, you submit an electronic application to the appropriate government agency (often the Department of Economic Development and Commerce, DDEC).

Following submission, there is a review period where authorities assess your eligibility, the nature of your business, and your compliance history. Applicants can expect follow-up requests for additional documentation or clarification. Once your application is approved, you’ll receive a tax decree outlining your specific benefits, obligations, and validity period. Timelines vary, but proactive preparation of documents can help expedite the process.

8. What taxes can be reduced under Act 60?

Act 60 can significantly lower corporate income taxes for qualifying export services companies, often to a flat rate of 4%. Additionally, certain individuals who establish bona fide residency may benefit from 0% tax on capital gains, dividends, and certain types of passive income, though specific rules apply to each category of income.

Property taxes and municipal taxes are not always covered by Act 60, but in some cases, decrees may include partial exemptions. Understanding which taxes are affected depends on your unique situation—whether you’re applying as an individual investor or as a business. Consulting a tax professional is highly recommended to optimize your strategy.

9. Are there any mandatory philanthropic or social contribution requirements?

Yes, certain Act 60 benefits require that individual decree holders make annual philanthropic contributions to local nonprofits or charities in Puerto Rico. The amount can vary but is typically in the range of a few thousand dollars per year, ensuring some social impact locally.

Some business incentives may also require job creation or investment in local communities, thereby bolstering Puerto Rico’s economic development goals. Compliance with these requirements is essential to maintain your Act 60 benefits; failing to uphold them can lead to suspension or revocation of the decree.

10. How long does it take to receive an Act 60 decree?

Processing times vary depending on the completeness of your application, the type of incentive you’re seeking, and the current workload of government agencies. On average, applicants can expect anywhere from a few weeks to several months. Thorough preparation of all required documentation and prompt responses to government inquiries can help speed up the process.

If you are missing key forms or need additional clarifications, your application could be delayed. Once approved, you’ll receive a decree specifying your obligations and the term of your tax benefits. It’s wise to maintain communication with a qualified attorney or advisor to streamline the approval process and reduce wait times.

11. Can I still qualify if I already have an Act 20 or Act 22 decree?

Existing decree holders usually retain the benefits outlined in their original agreements until the expiration date. However, if you seek additional or modified benefits, you may need to apply under Act 60. In some cases, transitioning from Acts 20 or 22 to Act 60 might be advantageous, especially if new provisions better align with your evolving personal or business circumstances.

It’s important to consult with a professional to see whether maintaining your current decree or opting for a new one under Act 60 will yield greater benefits. Each situation is unique, so a tailored analysis can help you choose the best course of action.

12. What are my ongoing compliance obligations under Act 60?

Both individuals and businesses must meet annual filing requirements with the Puerto Rico government, which may include financial statements, proof of residency, and updated corporate documentation. These reports validate that you continue to meet Act 60’s requirements—such as maintaining export services status or residency criteria.

Decree holders should also follow any philanthropic obligations, community investment, or local hire mandates that their specific incentive decree might include. Failure to comply with these obligations could lead to penalties or loss of tax benefits. It’s wise to work closely with local legal or accounting professionals to avoid missteps.

13. Do I need to relocate my entire family or business operations?

For individual investors or professionals seeking personal tax benefits, establishing bona fide residency typically means spending the majority of the year in Puerto Rico and demonstrating that your primary home is on the island. Your family doesn’t necessarily have to move with you, but certain factors—such as whether your spouse and dependents live elsewhere—can affect the “closer connection” test for residency.

For businesses, Act 60 often requires maintaining an office or significant operations on the island, especially for export service companies. While it may not be necessary to move your entire team, you will likely need local employees or operations that justify the claim of being based in Puerto Rico. Ultimately, the requirements vary by industry and personal circumstances.

1. Actors and Performers

• Who Qualifies?
• Stage and film actors, theater performers, TV personalities, and other performance-based artists who generate income from royalties, appearances, endorsements, and performance contracts.
• Potential Benefits
  • Reduced or 0% Tax on Certain Income Streams: Income derived from worldwide capital gains or intellectual property (e.g., if the actor owns rights to their performance) may be eligible for partial or full exemption.
  • Lower Tax on Endorsements/Royalties: If an actor receives royalties from their performances, these might be taxed at reduced rates when structured and earned while a bona fide resident of Puerto Rico.

2. Singers, Musicians, and Recording Artists

• Who Qualifies?
• Singers, songwriters, composers, DJs, and others in the music industry who earn income from royalties, licensing deals, and sales of music.
• Potential Benefits
  • 0% Tax on Royalties and Licensing: If these revenue streams are considered Puerto Rico–sourced, they may qualify for Act 60’s tax incentives.
  • Lower Overall Tax Burden: Relocating to Puerto Rico and establishing residency can provide long-term tax savings on income from tours, merchandise sales, or distribution deals (subject to proper structuring).

3. Authors, Screenwriters, and Content Creators

• Who Qualifies?
• Writers of books, e-books, scripts, bloggers, vloggers, podcasters, YouTubers, and other digital content creators who derive income from royalties, ad revenue, or licensing fees.
• Potential Benefits
  • Exempt or Reduced Tax on Royalties: Similar to musicians, authors and screenwriters can benefit from lower tax rates on royalties if they are bona fide residents.
  • Capital Gains Exemptions: For creators who sell rights or intellectual property (e.g., a script sold to a production studio), the capital gain might be exempt or taxed at a preferential rate.

4. Financial Traders, Stock Brokers, and Investment Managers

• Who Qualifies?
• Day traders, hedge fund managers, financial advisors, and brokers earning income primarily through capital gains, dividends, and interest.
• Potential Benefits
  • 0% Capital Gains Tax: One of the biggest draws of Act 60 is the potential elimination or significant reduction of capital gains tax for bona fide residents.
  • Tax-Advantaged Investment Strategies: Brokers and traders can optimize trading strategies by leveraging Puerto Rico’s favorable tax treatment of investment income.

5. Entrepreneurs and Startup Founders

• Who Qualifies?
• Individuals who create or manage startups, especially those related to technology, e-commerce, software development, or other scalable business models with potential for large capital gains upon exit.
• Potential Benefits
  • Lower Corporate Taxes: If the startup also qualifies under the export services provisions, the business itself might enjoy a reduced corporate tax rate (commonly 4%).
  • Capital Gains on Equity: For founders holding significant equity, the gains realized upon selling or exiting the startup may be tax-free or taxed at a much lower rate compared to the U.S. mainland.
  • Attracting Talent: Puerto Rico’s incentives can help attract or retain employees seeking a lower personal tax environment.

6. Consultants and Professional Service Providers

• Who Qualifies?
• Management consultants, marketing experts, business coaches, creative agencies, graphic designers, IT professionals, and other individuals offering professional services.
• Potential Benefits
  • Reduced Income Tax on Service Revenue: Under Act 60, individuals who offer export services (services to clients outside Puerto Rico) can benefit from low corporate tax rates if they set up a qualifying company, and potential personal tax advantages if they’re Puerto Rico residents.
  • Simplified Structuring: Professionals can structure their consulting business to optimize both corporate and individual taxes under the incentive program.

Key Takeaways

• Bona Fide Residency Requirement: All the above professionals must meet strict residency criteria, including the 183-day rule, having a principal home in Puerto Rico, and not having a “tax home” outside the island.
• Type of Income Matters: Capital gains, dividends, royalties, and interest are typically where the largest tax advantages are found. Earned (active) income from employment may still be subject to Puerto Rico income tax, although often at lower effective rates than on the mainland U.S.
• Compliance Is Crucial: To maintain these benefits, individuals must adhere to annual filing obligations, philanthropic contributions (if applicable), and remain in compliance with all Puerto Rico and U.S. tax regulations.
• Consult a Professional: Because each individual’s situation is unique, seeking advice from a qualified tax attorney or CPA in Puerto Rico is highly recommended before applying for incentives or relocating.

Act 60 in Puerto Rico offers a range of tax incentives and benefits for both individuals and businesses. Eligibility varies depending on the specific incentive within the Act, but the following points outline the general criteria:

• Individuals (Personal Tax Incentives)
  • Bona Fide Residency: Individuals seeking personal tax benefits—such as those previously offered under Act 22—must establish bona fide residency in Puerto Rico. This includes meeting the 183-day presence requirement, demonstrating a closer connection to Puerto Rico than to any other U.S. jurisdiction or foreign country, and not having a tax home outside Puerto Rico.
  • Personal Investment Activities: Individuals often qualify by earning capital gains or passive income (like dividends or interest) that can benefit from reduced or zero Puerto Rico tax rates—provided they meet all residency rules.
• Export Services Companies (Formerly Act 20)
  • Service-Based Businesses: To qualify under the export services provisions, companies must provide services to clients or customers outside of Puerto Rico. Examples include consulting, financial advisory, software development, marketing, professional services, and other service-oriented businesses.
  • Puerto Rico Operations: Businesses must be headquartered in Puerto Rico or have substantial operations on the island, including office space and Puerto Rican employees.
• Manufacturing, Tourism, Creative Industries, and Other Sectors
  • Specific Industries: Act 60 consolidates incentives for various sectors such as manufacturing, tourism, hospitality, creative industries (like film and music production), technology and research, insurance, and more. Each program has unique requirements regarding investment, job creation, or production output.
  • Capital Investments: In some sectors (e.g., manufacturing or renewable energy), the entity may be required to make a specified capital investment in machinery, equipment, infrastructure, or research and development.
• Startups and Innovative Businesses
  • Entrepreneurial Incentives: Puerto Rico is actively encouraging entrepreneurial activity, with additional benefits potentially available for tech startups, research and development (R&D) projects, or innovation-driven ventures.
  • Local Collaboration: Startups may need to partner with local educational institutions or research centers to fully benefit from special grants or lower tax rates in certain fields.
• Existing Decrees Transition
  • Act 20/22 Decree Holders: Individuals or businesses who already hold decrees under the older Acts 20 and 22 may be grandfathered in under certain conditions. In many cases, those decrees remain valid until their original expiration. However, it is important to understand how Act 60 incentives can supplement or replace those pre-existing benefits if needed.
• Compliance Requirements
  • Annual Filings: Both individuals and businesses must remain compliant with Puerto Rico’s tax reporting rules and annual filing requirements.
  • Local Contribution: Some incentives include provisions requiring recipients to contribute to Puerto Rico’s local community or government funds, such as specific philanthropic donations.