Act 60 Puerto Rico, officially known as the Puerto Rico Incentives Code, is a comprehensive tax incentive program that consolidated several previous tax laws, including the former Act 20 Export Services Act and Act 22 Individual Investors Act. The legislation was created to attract entrepreneurs, investors, business owners, and high-net-worth individuals to Puerto Rico by offering substantial tax incentives for qualifying activities.

Today, Act 60 remains one of the most attractive economic incentive programs available within a U.S. jurisdiction. It offers benefits to both individuals and businesses that establish a legitimate presence in Puerto Rico and comply with the program's requirements. The law covers multiple sectors, including export services, manufacturing, tourism, technology, finance, and investment activities.

The key to successfully benefiting from Act 60 is understanding and meeting the eligibility requirements. Simply moving to Puerto Rico or registering a company is not enough. Participants must satisfy strict residency, operational, and compliance standards to maintain their tax incentives.

Why Act 60 Is Popular

Act 60 has become popular because it combines significant tax savings with the stability of operating within a U.S. territory. Eligible export service businesses may qualify for a fixed 4% corporate income tax rate, while qualified investors may receive favorable treatment on certain investment income depending on their decree terms and application date.

Entrepreneurs in industries such as software development, consulting, digital marketing, financial services, and technology frequently relocate to Puerto Rico to take advantage of these incentives. Investors are also attracted by the opportunity to establish tax residency in Puerto Rico while remaining under U.S. legal protections.

Recent discussions among tax professionals and business owners indicate that Act 60 continues to be a major factor in relocation decisions despite upcoming rule changes for future applicants.

Act 60 Residency Requirements

One of the most important Act 60 Puerto Rico requirements is becoming a bona fide resident of Puerto Rico.

Physical Presence Test

The most widely known requirement is the 183-day rule. Generally, individuals must spend at least 183 days per year physically present in Puerto Rico. Tax authorities may review travel records, passports, flight logs, utility bills, and other documentation to verify compliance.

Tax Home Test

Your primary place of business and economic activity must be located in Puerto Rico. This means Puerto Rico should be the center of your professional activities and financial operations. Merely maintaining an address on the island without conducting meaningful activities there may not satisfy this requirement.

Closer Connection Test

You must demonstrate stronger personal and economic ties to Puerto Rico than to any other jurisdiction. Authorities often review:

• Primary residence
• Driver's license
• Voter registration
• Banking relationships
• Professional memberships
• Family connections
• Community involvement

The closer connection test helps establish that Puerto Rico is genuinely your primary home rather than a temporary tax-planning location.

Individual Investor Requirements

The Individual Resident Investor Incentive, formerly Act 22, includes additional requirements beyond residency.

Eligibility Rules

Applicants generally must establish bona fide Puerto Rico residency and satisfy eligibility requirements under current law. Recent reforms introduced a six-year non-residency lookback requirement for many new applicants.

Charitable Contribution Requirements

Most decree holders must make annual charitable contributions to qualified Puerto Rico nonprofit organizations. These donations support local economic development and community initiatives while helping participants maintain compliance.

Primary Residence Requirement

Act 60 participants are generally required to purchase and maintain a primary residence in Puerto Rico within the timeframe established by the program. This requirement reinforces the government's objective of attracting long-term residents rather than temporary visitors.

Export Services Requirements

Businesses seeking Chapter 3 Export Services benefits must satisfy operational requirements in addition to residency standards.

Eligible Services

Many professional services qualify under Act 60, including:

The essential requirement is that services must be provided from Puerto Rico to clients located outside Puerto Rico.

Office Requirements

A qualifying company must maintain a bona fide office or establishment in Puerto Rico. The office serves as evidence that the business genuinely operates from Puerto Rico rather than merely being registered there.

Client Requirements

Services must generally be provided to non-resident individuals or entities with no Puerto Rico nexus. Income derived from Puerto Rico clients often does not qualify for Export Services incentives.

Employee Requirements

Employee requirements vary depending on revenue levels. Many businesses are required to employ at least one Puerto Rico resident employee, although specific thresholds may differ based on annual revenue and the nature of the business. Businesses generating more than $3 million in annual revenue typically face additional employment requirements.

Act 60 Application Process

The application process generally involves:

1. Determining eligibility.
2. Establishing Puerto Rico residency if applicable.
3. Forming an eligible business structure.
4. Securing a Puerto Rico office.
5. Preparing supporting documentation.
6. Submitting an application to Puerto Rico's Department of Economic Development and Commerce (DDEC).
7. Obtaining an incentive decree.

The decree functions as a contractual agreement with the Puerto Rico government and often provides tax certainty for 15 years, with potential renewal opportunities.

Annual Compliance Requirements

Receiving an Act 60 decree is only the beginning. Participants must satisfy ongoing compliance obligations, including:

• Annual reports
• Tax filings
• Employment verification
• Residency documentation
• Charitable contribution records
• Maintenance of Puerto Rico operations

Failure to comply with these requirements can jeopardize valuable tax benefits.

Common Mistakes to Avoid

Many applicants underestimate the complexity of Act 60. Common mistakes include:

• Failing to meet the 183-day residency requirement
• Maintaining stronger ties to another jurisdiction
• Improperly sourcing income
• Operating without sufficient business substance
• Missing annual reporting deadlines
• Inadequate recordkeeping

Even experienced business owners frequently seek legal and tax guidance because Act 60 compliance can become highly technical. Community discussions often emphasize the importance of working with professionals familiar with Puerto Rico tax law.

Benefits of Meeting Act 60 Requirements

The rewards for compliance can be substantial. Eligible export service companies may qualify for a 4% corporate income tax rate, 100% exemption on qualifying dividend distributions, significant property tax reductions, and municipal tax incentives.

Investors may also access favorable treatment for qualifying investment income under the Individual Resident Investor Incentive Program. Combined with Puerto Rico's strategic location, growing entrepreneurial ecosystem, and U.S. legal framework, these benefits continue attracting individuals and businesses from around the world.

Conclusion

Understanding Act 60 Puerto Rico requirements is essential before pursuing relocation or tax incentive opportunities. The program offers some of the most attractive tax benefits available in a U.S. jurisdiction, but success depends on meeting strict residency, operational, and compliance standards.

Whether you are an investor, entrepreneur, consultant, or business owner, proper planning is critical. By establishing genuine Puerto Rico residency, maintaining business substance, and complying with annual reporting obligations, participants can position themselves to take full advantage of Act 60's long-term benefits.

FAQs

1. What is the minimum residency requirement for Act 60?

Most participants must satisfy the bona fide residency rules, including spending at least 183 days per year in Puerto Rico.

2. Do I need an office in Puerto Rico?

Yes. Export Services businesses generally must maintain a bona fide office or establishment in Puerto Rico.

3. What types of businesses qualify?

Consulting, software development, marketing, financial services, research, engineering, and many other professional services may qualify if clients are located outside Puerto Rico.

4. Is Act 60 replacing Act 22?

Yes. Act 22 was consolidated into Act 60 in 2019, and investor incentives are now administered through Act 60's Individual Resident Investor Incentive Program.

5. How long does an Act 60 decree last?

Export Services decrees generally provide benefits for 15 years and may be eligible for renewal under certain conditions.