Puerto Rico's Act 60 is one of the most powerful legal tax strategies available to any U.S. resident. Our team — including a Puerto Rico-based tax law specialist — guides you through every step of qualification, application, and ongoing compliance.
Act 60 of 2019 — formally known as the Puerto Rico Incentives Code — is a comprehensive tax incentives law that consolidated Puerto Rico's previous Acts 20 and 22 into a single, modern framework. Signed into law on July 1, 2019, it was designed to attract high-net-worth individuals, successful entrepreneurs, and export-service businesses to Puerto Rico by offering extraordinary tax rates that are unavailable anywhere else in the U.S. system.
Puerto Rico is a U.S. territory, not a state. This distinction matters enormously for tax purposes. Because Puerto Rico is not a U.S. state, it has the constitutional authority under Section 936 and longstanding U.S. tax code provisions to set its own income tax rates for bona fide residents — and Congress has never overridden this authority. As a result, individuals and businesses that genuinely establish residency and operations in Puerto Rico can pay dramatically lower taxes on their Puerto Rico-sourced income.
Act 60 is not a loophole. It is not a tax shelter or a gray area strategy. It is a deliberate, government-sponsored economic development tool — and when implemented correctly with genuine residency, it is entirely legal and fully compliant with U.S. federal law. The IRS is aware of Act 60 and has published guidance on it. The key is real compliance, not paper compliance.
Quick Definition: Act 60 Puerto Rico = 0% capital gains tax on new appreciation + 4% corporate rate for export services + 0% dividend tax — all for bona fide Puerto Rico residents, authorized under federal law, for up to 15 years (Chapter 2) or 20 years (Chapter 3).
The tax savings under Act 60 Puerto Rico are among the most substantial available to any U.S. taxpayer — legally. Here is a plain-English breakdown of what the law provides:
Important: The 0% capital gains rate applies only to new appreciation that accrues after you establish Puerto Rico residency. Gains that built up while you were a U.S. mainland resident remain fully taxable to the IRS at standard federal rates — often 15–20% long-term, or higher for short-term gains. Pre-move tax planning is absolutely critical.
Act 60 operates through two primary pathways. Understanding which one applies to your situation — or whether you need both — is the first step in your planning process.
For high-net-worth individuals with capital gains exposure from stocks, crypto, real estate, or business sales.
For businesses that export services from Puerto Rico — clients and customers located outside the island.
Act 60 is designed for people who are truly willing to build a life in Puerto Rico.
It is not a paper move. It is not a legal fiction. The IRS has dedicated enforcement teams specifically targeting Act 60 participants who claim benefits without genuinely relocating.
Act 60 is available to any U.S. citizen or resident — regardless of where they currently live. There is no income threshold, no age requirement, and no asset minimum to apply. However, the benefits require you to genuinely become a bona fide Puerto Rico resident.
Good candidates for Chapter 2 (Individual Investors) include:
Good candidates for Chapter 3 (Export Services) include:
This is the most critical part of Act 60 compliance — and where most audits begin. To qualify as a bona fide Puerto Rico resident under IRS rules, you must satisfy all three tests every single year your decree is active. These tests are not optional, and they are not a one-time hurdle.
You must physically spend a minimum of 183 days per year in Puerto Rico. Days count from midnight to midnight. Travel days are handled under specific IRS rules. Detailed contemporaneous records — passport stamps, boarding passes, credit card records — are essential for proving compliance if audited.
Your primary place of business must be located in Puerto Rico. If you continue to maintain a U.S. mainland office, regularly work for a U.S. employer, or derive the majority of your income from a U.S.-based source, your tax home may still be considered the mainland — regardless of where you sleep 183 nights.
Puerto Rico must be your primary home — meaning: Puerto Rico driver's license, voter registration in PR, your bank accounts, your primary physician, your social and community ties, and no maintained home in any U.S. state. The IRS looks at the totality of your life connections, not just where you sleep.
Chapter 2 Additional Requirements: You must also (1) purchase and own residential property in Puerto Rico within two years of receiving your decree, and (2) make an annual charitable contribution of $10,000 split between approved Puerto Rico nonprofit organizations.
Applying for an Act 60 decree in Puerto Rico is a structured process that involves the Puerto Rico Department of Economic Development and Commerce (DDEC). Here is the complete step-by-step overview:
Before you establish residency, work with a qualified tax advisor to plan your move. Identify which assets you hold, what gains have accrued, what you plan to sell, and how to structure your business. This step determines how much you actually save — and prevents costly IRS problems down the road.
Move to Puerto Rico, begin your day-count, obtain a PR driver's license, register to vote in PR, open Puerto Rico bank accounts, sever ties with your former U.S. state of residence, and begin building your life on the island. Do not apply for your decree until you have genuinely established residency.
Gather the required documentation including personal identification, proof of PR residency, description of business activities (for Chapter 3), entity formation documents, and supporting financial information. Your tax specialist prepares the formal decree application package for submission to the DDEC.
Submit your application through Puerto Rico's SURI (Unified Internal Revenue System) portal. Chapter 2 filing fees are approximately $750–$1,000. Chapter 3 fees start at $5,000. Once submitted, your application is assigned to a DDEC examiner for review.
The DDEC typically processes Act 60 applications within 60 to 120 days. During this period, your examiner may request additional documentation or clarification. Do not sell significant assets or make major tax-sensitive decisions while waiting for your decree to be issued.
Once your decree is issued, you are officially an Act 60 decree holder. From this point forward, you must file an annual compliance report with the DDEC, pay the $300 annual fee, maintain the required charitable contribution (Chapter 2), and continue satisfying all three residency tests every year.
The tax differential between Puerto Rico under Act 60 and a typical U.S. high-tax state is one of the most dramatic in the American tax system. Here is a direct comparison for a successful individual or business owner:
| Tax Category | U.S. Mainland (High-Tax State) | Act 60 Puerto Rico | Your Savings |
|---|---|---|---|
| Long-Term Capital Gains | 20% federal + up to 13.3% state | 0% (post-move appreciation) | Up to 33%+ |
| Short-Term Capital Gains | 37% federal + up to 13.3% state | 0% (post-move) | Up to 50%+ |
| Corporate Tax Rate (Services) | 21% federal + state corporate tax | 4% flat rate | 17%+ savings |
| Dividend Income | Up to 23.8% (federal NIIT included) | 0% (PR-sourced) | Up to 24% |
| Net Investment Income Tax (NIIT) | 3.8% surcharge on investment income | Not applicable to PR residents | 3.8% savings |
| Crypto Gains | Up to 37% federal + state | 0% on post-move appreciation | Up to 50%+ |
Rates shown are illustrative. High-tax state example uses California top rates. Federal rates shown at highest bracket. Actual tax liability depends on individual circumstances, income structure, and compliance. Consult a qualified tax professional.
The IRS has dedicated enforcement resources specifically targeting Act 60 Puerto Rico participants. The agency is not hostile to the program itself — it is hostile to people who claim benefits they haven't genuinely earned. Here are the most common red flags:
This is the single most common mistake. Many Act 60 participants spend significant time traveling or visiting family in the U.S. mainland without tracking their days carefully. The IRS looks at credit card records, phone data, and flight records to reconstruct where you actually were. If you can't prove 183+ days, you lose your benefits — potentially retroactively.
Owning a vacation home in Florida or California is permissible. Maintaining your primary residence in a U.S. state while claiming Puerto Rico residency is not. The IRS looks at which home is larger, which one has your family, and which state issued your driver's license.
Clients sometimes establish a Puerto Rico address, apply for their decree, and immediately sell a large crypto position — before their residency is genuinely established. The IRS can and does treat these sales as occurring while the taxpayer was still a mainland resident if the timing is suspicious.
If your children are enrolled in school in a U.S. state, the IRS considers this a major indicator that your family's closer connection is still to the mainland. This is one of the most commonly cited factors in Act 60 audit findings.
Chapter 2 decree holders must purchase (not rent) residential property in Puerto Rico within two years of receiving their decree. Failing to do so is a direct violation of your decree conditions.
If your primary business is based in the U.S. and you continue to manage it while living in Puerto Rico, the IRS may argue that your tax home is still the U.S. Proper business restructuring and documentation of your Puerto Rico business presence is critical for Chapter 3 participants.
Bottom line: Act 60 works when it reflects reality — when you genuinely build your financial life and primary residence in Puerto Rico. Our team helps you structure and document that reality so it holds up under IRS scrutiny.
We combine IRS resolution expertise with Puerto Rico legal knowledge — covering every step from your first consultation to annual compliance, year after year.
We prepare and file your complete Act 60 decree application with the DDEC, handling all required documentation, examiner communication, and follow-through until your decree is issued.
Timing is the most critical variable. We plan your move, asset sale schedule, and income strategy to maximize what you capture from day one — and prevent costly pre-move gains from slipping through.
We help you build and maintain the documentation trail that proves genuine residency every year — day counts, property records, banking transfers, voter registration, and annual DDEC compliance reports.
Act 60 doesn't eliminate all U.S. federal obligations. We integrate your Puerto Rico strategy with your ongoing federal filing requirements so you remain fully compliant on both the island and mainland.
If the IRS questions your Act 60 status, our team responds immediately. We have deep experience defending Act 60 audits — protecting your decree and your tax savings against IRS challenge.
For Chapter 3 clients, we structure your export services entity correctly from day one — ensuring qualified income, proper classification, and a business presence in Puerto Rico that holds up to scrutiny.
Act 60 of 2019 is Puerto Rico's consolidated tax incentives law, replacing Acts 20 and 22. It offers qualifying individuals 0% capital gains tax on post-move appreciation, 0% dividend income, and qualifying export service businesses a 4% flat corporate tax rate. It is fully authorized under U.S. federal law.
Any U.S. citizen or resident can apply. To receive benefits, you must become a bona fide Puerto Rico resident — spending at least 183 days per year in PR, establishing Puerto Rico as your tax home, and having stronger ties to Puerto Rico than to any U.S. state. Chapter 2 also requires purchasing residential property within two years.
Assets you purchase after becoming a bona fide Puerto Rico resident appreciate tax-free while you reside in PR. When you sell, any gain that accrued during your residency is taxed at 0%. Pre-move appreciation — gains that built up before your move — remains subject to U.S. federal tax at standard rates.
Bona fide Puerto Rico residents pay Puerto Rico taxes instead of federal income taxes on PR-sourced income. However, U.S.-sourced income — wages from U.S. employers, income from U.S. businesses, certain passive income — may still be subject to federal tax. Proper structuring and legal counsel are critical.
Chapter 2 application fees are approximately $750–$1,000. Chapter 3 fees start at approximately $5,000. Chapter 2 decree holders must also make a $10,000 annual charitable contribution to qualifying Puerto Rico nonprofits. Annual DDEC renewal fees are approximately $300 per year.
Yes, entirely. Act 60 is a Puerto Rico law fully authorized under the U.S. federal framework for territories. The IRS acknowledges the program and has published guidance on it. When implemented with genuine residency and proper compliance, Act 60 is completely legal. The IRS targets participants who fake residency, not those who genuinely move.
The DDEC typically processes Act 60 applications within 60 to 120 days from submission. Rush processing may be available in some circumstances. You should not make major asset sales or financial decisions in reliance on your decree before it is officially issued in writing.
Yes — Act 60 is especially powerful for crypto investors with large unrealized gains. Post-move appreciation on Bitcoin, Ethereum, or any other digital asset is taxed at 0% under Chapter 2. The key is establishing genuine Puerto Rico residency before you sell. Our team specializes in timing and structuring these moves correctly.
To be a bona fide Puerto Rico resident you must satisfy: (1) the Presence Test — 183+ days per year in PR; (2) the Tax Home Test — primary place of business in PR; and (3) the Closer Connection Test — stronger ties to PR than to any U.S. state, including PR driver's license, voter registration, and bank accounts.
Yes, but structure is critical. If your business exports services to clients outside Puerto Rico, you can qualify for Chapter 3 and the 4% corporate rate. If your income is primarily U.S.-sourced, legal restructuring is required. Simply moving to Puerto Rico while running a U.S. business does not automatically confer Act 60 benefits.
Violating decree conditions — including failing to meet residency tests, not purchasing required property, or missing the annual charitable contribution — can result in revocation of your decree and IRS scrutiny of past tax years. The IRS can assess back taxes, interest, and penalties for years in which you claimed benefits you did not qualify for.
Our team includes Jafet Martinez, a Puerto Rico-based tax law specialist with deep knowledge of Act 60 requirements, working alongside experienced IRS resolution specialists. We handle decree applications, pre-move planning, residency compliance documentation, business structuring, and IRS audit defense — all under one roof. Schedule a free consultation to get started.
Schedule a free consultation with our team. We'll review your financial situation, explain your Act 60 options, and give you an honest assessment of whether the strategy makes sense for you — and exactly how to do it right.
No obligation. No pressure. Just expert guidance from a team with a Puerto Rico Act 60 specialist on staff.
Everything you need to know about qualifying, applying, and staying compliant with your Act 60 decree.
How Bitcoin and digital asset investors are eliminating capital gains by relocating to Puerto Rico before their sale.
The 183-day rule, closer connection test, and property purchase requirement — fully explained with IRS context.
Pre-move vs. post-move appreciation — which assets qualify and how to time your move for maximum savings.
Chapter 3 explained — qualifying services, entity structure, and how to protect your 4% rate year after year.
The most common ways Act 60 participants lose their benefits — and what to do instead.