Act 60, answered

Act 60 of 2019 consolidated Puerto Rico's separate tax-incentive laws — including the former Acts 20 and 22 — into a single Incentives Code. Two chapters matter most to the people we work with: the Individual Investor decree (Chapter 2), for people who move their tax residence to Puerto Rico, and the Export Services decree (Chapter 3), for businesses serving clients outside Puerto Rico from an office on the island. A decree is a contract with the Government of Puerto Rico: defined tax treatment, for a defined term, in exchange for defined obligations.

Act 38-2026, signed on 10 March 2026, extended the programme rather than letting it lapse at the end of 2035, and set two different sets of terms depending on when an application is submitted. Applications submitted on or before 31 December 2026 keep the current Individual Investor treatment — 0% Puerto Rico tax on qualifying dividends, interest, and post-residency capital gains — through 2035. Applications submitted on or after 1 January 2027 are subject to a 4% rate on those categories, with the programme running to 2055.

The submission date controls. DDEC review can take months, and a decree issued in 2027 on an application filed in 2026 is treated as a 2026 application. This is why the calendar matters more than it looks: the work that has to happen before you can file — residency planning, documentation, and the application package itself — is what determines which set of terms you fall under.

In broad terms, an individual who has not been a resident of Puerto Rico for a defined lookback period and who becomes a bona fide resident of Puerto Rico. For applications submitted after 2026, that lookback is six years of prior non-residency. Whether your own history satisfies it is a question for your attorney — prior time in Puerto Rico, family ties, and the year you establish residency all bear on it.

It applies to income you realize as a bona fide resident of Puerto Rico: qualifying interest and dividends, and capital gains attributable to appreciation after you become a resident. Appreciation that accrued before you moved is generally not covered, and neither is income that remains sourced to the United States. The decree does not change how income earned before your move is taxed.

A business with a bona fide office in Puerto Rico that provides services to clients outside Puerto Rico may hold an Export Services decree, which sets a 4% Puerto Rico corporate income tax rate on eligible export income. Distributions of that income to a resident owner are generally not subject to further Puerto Rico tax. Typical qualifying activities include consulting, marketing, software development, professional services, research and development, and corporate headquarters functions. The decree carries its own conditions — a real office, real activity performed in Puerto Rico, and, depending on the size of the business, employment requirements.

You have to buy. The Individual Investor decree requires the holder to purchase residential property in Puerto Rico within two years of the decree being granted. A lease does not satisfy it. The property must serve as your principal residence and be held by you — it is not an investment slot to be rented out.

Bona fide residency is not a single number, but the presence test most people plan around is at least 183 days in Puerto Rico during the tax year. Two further tests apply alongside it — that your tax home is in Puerto Rico, and that you do not have a closer connection to somewhere else. In practice, keeping a contemporaneous record of your days is the difference between a defensible position and an argument.

The Individual Investor decree requires an annual charitable contribution of $10,000, split $5,000 and $5,000 between two qualifying Puerto Rico nonprofit organizations, at least one of which must appear on the list maintained for entities working against child poverty. It is due before 31 December each year and is evidenced in the annual report. Missing it is one of the more common ways a decree holder falls out of compliance.

An annual report to DDEC, accompanied by a filing fee, covering the prior year — the donation, your presence, the residence purchase, and the other conditions of your decree. It is separate from your Puerto Rico and United States tax returns, and it is the document through which the government confirms you are still entitled to the decree. Our understanding is that it is due in May of the following year; confirm the current date with your advisers, as it has moved before.

Not a fixed number of years — a decree runs until the date set in the incentives code as amended. Under Act 38-2026, an Individual Investor decree from an application submitted by 31 December 2026 runs through 2035; one submitted from 2027 onward runs through 2055 at the higher rate. Export Services decrees have their own term, with the possibility of renewal. What matters is the end date written in your own decree, not a rule of thumb.

United States citizens and residents remain subject to United States tax rules. What a bona fide resident of Puerto Rico may exclude from a United States return is Puerto Rico-source income; income that remains sourced to the United States is still reported and taxed there, and there are specific rules for gains on assets you owned before the move. This is the part of the analysis that most needs your own CPA — the interaction, not either system alone.

A decree is a contract, and failing its conditions can lead to revocation — potentially retroactive, with back taxes, interest and penalties. That is why the obligations are worth tracking as a calendar rather than remembering: the presence record, the donation, the residence purchase, and the annual report each have their own date, and the consequences of missing one are out of proportion to the effort of meeting it.

A feasibility review of your income and timeline; the residency plan, including where you will live and when the clock starts; assembling and filing the application with DDEC; the review period, which runs in months rather than weeks; the decree grant and its acceptance, with an acceptance fee; then the standing obligations — the residence purchase, the donation, the presence record, and the annual report. We hold the calendar for all of it.

We are a licensed Puerto Rico real estate brokerage that coordinates the whole relocation: the decree strategy, the property search and closing, and the compliance calendar that follows. We are not your attorney or your CPA, and we do not file your returns or give legal or tax advice. We work alongside the professionals who do, so that the decree, the house, and the calendar move as one file rather than three.