Puerto Rico’s much-celebrated Act 60 tax incentives program just got a facelift. In early 2025, the Puerto Rico Senate passed a reform bill updating Act 60, introducing some changes aimed at making the program more sustainable and fair for the long term. If you’re a high-net-worth individual eyeing Puerto Rico’s tax perks, here’s a clear, conversational rundown of what’s new – without the legal jargon.

What Changed Under the 2025 Reform for Act 60 Tax Incentives?

• 4% Tax on Investment Income for New Applicants: Perhaps the biggest update is a new 4% fixed tax rate on certain passive income (capital gains, interest, and dividends) for new Act 60 participants . Starting in 2026, anyone who applies for Act 60 will pay a flat 4% on those income streams, instead of enjoying a 0% rate as before. (Keep in mind, existing Act 60 decree holders are grandfathered in and won’t pay this 4% – their 0% rate on capital gains and other passive income remains intact.)
• Extended Timeline Through 2055: Another major win for investors is that Puerto Rico extended the Act 60 program’s benefits all the way to 2055 . Previously, these incentives were set to expire in 2035. By tacking on an extra 20 years, the government is signaling long-term commitment. You now have decades of runway to plan around Act 60’s tax benefits, which is great news if you’re thinking about generational wealth planning or business investments on the island.
  Maintained Core Benefits: Aside from the new 4% tax for future applicants, all the core benefits of Act 60 remain extremely attractive. Even new participants will still enjoy huge tax advantages – for example, Puerto Rico will continue to exempt 100% of Puerto Rico-sourced capital gains for current decree holders, offer a 75% exemption on property taxes, and keep corporate tax rates as low as 4% for qualifying businesses . In short, even with a slight tax, Puerto Rico is still one of the most appealing tax jurisdictions in the world.
• A Nod to Fairness and Transparency: The 2025 reform isn’t just about raising a bit of revenue – it’s also about optics and fairness. By introducing a modest tax and extending the timeline, Puerto Rico is sending a message that the program is here to stay and will contribute to the local economy. The government is aligning with global trends (like the push for minimum tax rates) while making sure Act 60 remains a win-win: attractive to investors yet more palatable to locals and policymakers.

Why These Changes Matter (Big Picture)

The tweaks in this bill might seem small – 4% is a low tax, after all – but they carry big significance:

• Stability for Investors: The extended timeline to 2055 and a clarified tax rate provide certainty. If you’re planning a move to Puerto Rico or already there, you can map out the next 30 years with confidence that the rules of the game are set. This long-term clarity is especially valuable for those managing family trusts, large portfolios, or business ventures – you have a stable framework to work with .
• Urgency for New Applicants: The introduction of the 4% tax in 2026 creates a now-or-never window for prospective applicants. If you apply before the end of 2025, you lock in the current benefits (0% tax on your Puerto Rico-sourced capital gains, interest, dividends) for the duration of your decree . Miss that deadline, and you’ll still get great benefits, but with a tiny 4% skim off your investment earnings. In other words, the sooner you act, the sweeter the deal.
• Fairness and Program Longevity: Politically, this reform helps ensure Act 60 can survive and thrive. By addressing criticisms (however modestly) that investors pay zero tax, Puerto Rico is aiming for a more balanced approach that can quiet some of the controversy. A 4% tax is low enough to keep investors coming, but not so low that the program is seen as a complete free ride. This balance could make Act 60 more sustainable and shield it from drastic changes in the future.

What It Means for You

If you’re an existing Act 60 participant: Rest easy – nothing changes for you right now. Your decree’s benefits (including that 0% tax on investment income) remain in force as promised. The new rules would only kick in if and when you need to renew after your decree expires (and with the extension to 2055, even renewals down the line can still enjoy long-term benefits, possibly at the 4% rate).

If you’re considering relocating under Act 60: the playing field is still very attractive, but the timeline matters. You have until Dec 31, 2025 to apply under the current terms. After that, any new decree will come with the 4% tax on passive income. It’s also worth noting that under the updated rules, new applicants must certify they haven’t been Puerto Rico residents for the previous six years – this targets the incentive to new arrivals (or folks who have been away a long time). For most mainland US investors this isn’t an issue, but it’s a point to be aware of if you have recent ties to the island.

Bottom line: Puerto Rico’s 2025 Act 60 update is a mix of continuity and small changes. The government extended the life of this lucrative program by 20 years, cementing its commitment to attracting wealthy individuals and businesses. In exchange, future participants will chip in a token 4% on certain earnings – a trade-off that keeps the island ultra-competitive on taxes while addressing some local concerns about fairness. It’s a high-level tweak, not an overhaul.

For investors and entrepreneurs, this reform provides greater clarity than ever. Puerto Rico is saying: “We want you here for the long haul, and we’ve made the rules more sustainable.” If you were on the fence about Act 60, the message is clear – the door is open, and it’s staying open.

Interested in how Puerto Rico’s updated incentives might work for your situation? Now is the perfect time to get personalized guidance. Contact Christian Kleiner for a private consultation – Christian can walk you through the implications of these Act 60 changes in plain English and help you explore whether making the move to Puerto Rico in 2025 is right for you. Don’t miss the opportunity while the full benefits are still on the table!