What is Puerto Rico’s ACT 60 tax incentive for individual investors?

ACT 60 is Puerto Rico’s Incentives Code that consolidates earlier programs (including the old Act 22). The Individual Resident Investor chapter gives qualifying new residents a preferential Puerto Rico tax rate of 0% (applications filed by December 31, 2026) or 4% (applications filed on or after January 1, 2027) on Puerto Rico-source interest, dividends, and capital gains that accrue after you become a bona fide resident. The benefit is locked in by decree and, for pre-2027 applicants, generally runs through 2035; later decrees extend to 2055.

It is available only to individuals who genuinely relocate and meet IRS bona-fide residency rules. Existing decree holders keep their original terms.

Who is eligible for ACT 60 Individual Resident Investor benefits?

You must become (and remain) a bona fide resident of Puerto Rico under the three IRS tests in IRC §937 and Publication 570:

• Presence test — generally at least 183 days physically present in Puerto Rico each year.
• Tax-home test — your principal place of business or employment is in Puerto Rico.
• Closer-connection test — you have stronger ties to Puerto Rico than to any U.S. state or foreign country.

You also need an approved decree from the Department of Economic Development and Commerce (DDEC). Applications filed after 2026 require proof you were not a Puerto Rico resident for the prior six years. A primary residence must be purchased (or title transferred) within two years of the decree.

What are the main tax benefits under ACT 60 compared with mainland U.S. rates?

Under a pre-2027 decree you pay 0% Puerto Rico tax on qualifying post-residency capital gains, interest, and dividends; post-2026 decrees pay 4%. Because you are a bona-fide Puerto Rico resident, IRC §933 generally excludes that Puerto Rico-source income from your U.S. federal return. Pre-move appreciation remains subject to special sourcing rules and can still face federal tax if sold within the 10-year window.

Savings can reach hundreds of thousands of dollars per year for high-net-worth investors with large portfolios or real-estate gains realized after the move.

What are the exact residency and compliance requirements?

Spend at least 183 days per year in Puerto Rico (or meet an alternative presence safe harbor), establish your tax home and closer connection on the island, and document everything. Buy a principal residence within two years of the decree grant. Starting in the second year make a $10,000 annual charitable donation to qualifying Puerto Rico nonprofits, pay the $5,000 annual decree fee, file the required DDEC report, and keep detailed day-count, utility, banking, and tax records. Failure on any IRS test for even one year can eliminate the federal exclusion for that year.

How does ACT 60 treat capital gains on investments and real estate?

Only appreciation that occurs after you become a bona-fide resident qualifies for the 0% or 4% Puerto Rico rate and the federal §933 exclusion. Assets you already owned before the move are subject to a 10-year look-back: the pre-move portion is generally treated as U.S.-source if sold within that window and remains federally taxable. After ten continuous years of residency, remaining gains can receive preferential Puerto Rico treatment. Real-estate purchases made after establishing residency can therefore generate fully preferential post-move gains when later sold.

Why do luxury real-estate buyers move to Puerto Rico under ACT 60?

High-net-worth buyers combine the tax savings with a Caribbean lifestyle and a growing inventory of luxury properties in San Juan, Dorado Beach, Rincón, and other exclusive areas. The requirement to purchase a primary residence within two years directly fuels demand for high-end homes, condos, and estates. Buyers who lock in a pre-2027 decree keep the 0% rate while living in a jurisdiction that still uses the U.S. dollar, U.S. legal system, and English as a common business language.

What is the critical deadline and next step?

Applications filed on or before December 31, 2026 preserve the 0% rate structure. After that date new decrees carry the 4% rate. Because the application date—not the move or decree-issuance date—controls the rate, early filing is essential if the 0% benefit matters to you.