Act 60 has become one of the most talked-about tax incentive programs in the United States and beyond. If you’ve ever wondered how entrepreneurs, investors, or remote business owners are reducing taxes legally while relocating to a tropical paradise, Act 60 is the answer. This law has transformed Puerto Rico into a tax-friendly hub for global talent, attracting thousands of individuals seeking financial freedom and business growth.

But what exactly is Act 60? How does it work? Who qualifies? You’re about to get the full breakdown.

What Is Act 60?

Act 60, also known as the Puerto Rico Incentives Code, is a massive reform legislation enacted in 2019. It consolidated dozens of prior tax incentive programs—including the well-known Act 20 (Export Services) and Act 22 (Individual Investors)—into a single simplified code. Its purpose is simple: attract investment, fuel economic development, and turn Puerto Rico into a global destination for business and innovation.

Why Act 60 Matters Today

Because Puerto Rico is a U.S. territory, qualifying individuals can legally reduce federal and local taxes without renouncing U.S. citizenship. That combination has put Act 60 on the map as one of the most powerful tax incentives available to Americans and foreign investors alike.

Who Can Benefit from Act 60?

Act 60 is especially attractive to:

• Remote business owners

• Investors with significant capital gains

• Export-service companies

• High-net-worth individuals

• Entrepreneurs seeking long-term tax stability

If you fall into one of these categories, Act 60 can dramatically reshape your financial future.

Understanding the Background of Act 60

Evolution from Acts 20 & 22

Before Act 60, Puerto Rico’s tax incentives were scattered across multiple laws. Acts 20 and 22 became extremely popular, offering major tax savings for service providers and investors. Act 60 combines these benefits under a single, more streamlined structure.

Purpose Behind the Consolidation

The intention was to simplify applications, reduce confusion, prevent abuses, and make Puerto Rico even more competitive globally.

Global Attention and Economic Impact

Since its introduction, thousands of individuals have relocated to Puerto Rico, boosting:

• Real estate markets

• Local job creation

• Entrepreneurial ecosystems

• Investment in local businesses

Act 60 has become a cornerstone of Puerto Rico’s economic strategy.

Key Tax Benefits Under Act 60

4% Corporate Tax Rate for Export Services

Businesses that qualify can enjoy a fixed 4% income tax rate—far lower than typical U.S. corporate rates. This is why many remote or digital-service companies move their operations to Puerto Rico.

0% Tax on Capital Gains

One of Act 60’s biggest attractions is the 0% tax rate on certain capital gains earned after becoming a bona fide resident.

Imagine legally paying zero tax on stock gains, crypto profits, or investment appreciation—it’s a financial game-changer.

0–15% Individual Resident Requirements

Depending on the incentive, individuals may qualify for dramatically reduced tax rates on various types of passive income.

Additional Incentives for Investors and Entrepreneurs

Other benefits include tax breaks for:

• Dividends

• Interest

• Actively traded investment portfolios

• Export manufacturing

• Renewable energy projects

Act 60 is broad and multifaceted.

Requirements to Qualify for Act 60

Bona Fide Residency Rules

To benefit from Act 60, you must become a bona fide resident of Puerto Rico. The IRS uses three tests:

Physical Presence Test

You must spend at least 183 days in Puerto Rico each year.

Tax Home Test

Your main place of business or employment must be in Puerto Rico.

Closer Connection Test

Your personal and financial ties must be stronger in Puerto Rico than in the mainland U.S.

Business Eligibility Requirements

Your business must export services—meaning it serves clients outside Puerto Rico.

Compliance and Reporting Obligations

Act 60 decree holders must:

• File annual reports

• Pay compliance fees

• Maintain proper records

• Contribute yearly donations (for investors)

Failing to follow requirements can result in losing benefits.

Act 60 for Export Service Businesses

What Are Eligible Export Services?

These include:

• Consulting

• Marketing

• Software development

• Graphic design

• Finance and accounting

• E-commerce management

• Many digital or remote services

Examples of Qualifying Industries

Tech entrepreneurs, digital marketers, agency owners, and consultants often qualify easily.

How Businesses Leverage the 4% Rate

Many founders move management functions to Puerto Rico, establish operations there, and enjoy predictable, long-term tax savings.

Act 60 for Investors

Passive Income Benefits

Dividends and interest may be tax-advantaged under the program.

Treatment of Capital Gains

Gains accrued after establishing residency may qualify for the 0% tax rate.

Investor Responsibilities and Limitations

Investor decree holders must meet annual charitable donation requirements and follow reporting rules.

Setting Up a Business Under Act 60

Steps to Apply for a Tax Decree

1. Form a Puerto Rican LLC or corporation

2. Apply through the Online Incentives Portal

3. Pay filing and acceptance fees

4. Submit compliance documents

5. Receive your 15–20-year tax decree

Formation of an LLC or Corporation

Businesses operate locally but serve clients outside Puerto Rico.

Compliance, Fees & Annual Filings

Business decree holders must maintain payroll (if required), file annual returns, and comply with local regulations.

Act 60’s Real-World Impact

How It Attracts Entrepreneurs

Act 60 has turned Puerto Rico into a hotspot for:

• Startups

• Crypto traders

• Hedge fund managers

• Remote business founders

Puerto Rico’s Economic Growth

The incentive program has brought billions of dollars into the island, boosting jobs and development.

Common Misconceptions

Many people mistakenly believe Act 60 is a loophole or illegal. In reality, it is fully supported by both Puerto Rican and U.S. law.

Challenges and Considerations

Residency Enforcement

Authorities increasingly verify residency claims, so compliance is crucial.

Public Perception Issues

Some locals criticize rising housing prices and demographic shifts.

Legal & Tax Complexity

Professional guidance is recommended to avoid costly mistakes.

Conclusion

Act 60 is one of the most transformative tax incentive programs available today. Whether you’re an investor seeking tax-free capital gains or a business owner ready to relocate your export services, Act 60 offers powerful financial benefits paired with the lifestyle perks of living in a tropical, culturally rich U.S. territory. With proper planning and compliance, Act 60 can unlock unparalleled long-term tax savings and business opportunities.

FAQs

1. Is Act 60 legal for U.S. citizens?

Yes, Act 60 is fully legal and operates within U.S. federal guidelines.

2. Do I need to live full-time in Puerto Rico?

You must meet residency tests, including 183-day physical presence.

3. Can passive income qualify for tax benefits?

Yes, certain passive income streams may benefit depending on the decree.

4. How long does an Act 60 decree last?

Most decrees last between 15 and 20 years.

5. Can crypto traders qualify for Act 60?

Absolutely—crypto gains are one of the most common qualifying capital gains categories.