Act 60 Explained: Strategic Tax Perks for Investors and Entrepreneurs

Puerto Rico has emerged as a dynamic hub for forward-thinking investors and entrepreneurs, thanks largely to the benefits offered under puerto rico tax incentives act60—the Puerto Rico Incentives Code. This legislation, designed to drive economic development and attract high-value talent and capital to the island, offers substantial tax advantages for individuals and businesses that qualify. For U.S. citizens seeking to optimize their financial strategies while enjoying an exceptional quality of life, Act 60 presents a compelling opportunity.
What is Act 60?
Act 60, enacted in 2019, consolidated and updated several previous tax incentive laws, including Acts 20 and 22. The goal was to streamline and enhance Puerto Rico’s ability to attract new residents and businesses, especially those engaged in export services, finance, and investment. Under Act 60, qualifying individuals and entities can access significant tax incentives in exchange for relocating to Puerto Rico and contributing to its economy.
There are two primary segments of Act 60 that are most relevant to investors and entrepreneurs:
Export Services Incentive – Designed for service-based businesses that export to clients outside of Puerto Rico.
Individual Resident Investor Incentive – Tailored to individuals who move to Puerto Rico and generate passive income or capital gains from Puerto Rico sources.
Key Tax Benefits
For Entrepreneurs and Export Services Providers:
4% Corporate Tax Rate: Eligible businesses providing services to clients outside Puerto Rico may pay only a 4% flat corporate tax rate on qualifying income.
100% Tax Exemption on Distributions: Dividends paid from earnings generated through export services are generally exempt from Puerto Rico income taxes.
No Federal Income Tax on Puerto Rico-Sourced Income: For bona fide residents, income sourced from within Puerto Rico is not subject to U.S. federal income tax.
For Investors:
100% Tax Exemption on Capital Gains: Long-term capital gains accrued after becoming a resident are fully exempt from Puerto Rico income tax.
Exemptions on Dividends and Interest: Certain Puerto Rico-sourced dividend and interest income may also qualify for full tax exemption.
These benefits can lead to significant tax savings for qualifying individuals and businesses, especially those who previously operated in higher-tax jurisdictions on the U.S. mainland.
Residency Requirements
To qualify for Act 60 benefits, individuals must become bona fide residents of Puerto Rico, which includes:
Physical Presence: Spending at least 183 days per year on the island.
Tax Home: Puerto Rico must be the primary place of business and residence.
Closer Connection Test: Demonstrating stronger personal and economic ties to Puerto Rico than to any other jurisdiction.
It’s essential to work with experienced tax professionals to ensure full compliance with both Puerto Rico and U.S. laws.
A Strategic Move with Lifestyle Perks
Beyond tax benefits, relocating to Puerto Rico under Act 60 means enjoying a vibrant island lifestyle—with warm weather, stunning beaches, a rich cultural heritage, and modern infrastructure. For many, it’s a chance to grow both personally and professionally while living in a tropical paradise.
Final Thoughts
Act 60 represents a strategic tool for investors and entrepreneurs seeking to maximize returns, reduce tax burdens, and enhance their quality of life. With proper planning and a long-term vision, the incentives offered under this program can be a powerful catalyst for building wealth and expanding business opportunities—all while contributing to Puerto Rico’s continued growth and transformation.