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“In America, there are two tax systems; one for the informed and one for the uninformed. Both systems are legal..." - Judge Learned Hand

Incentives Code of Puerto Rico

Below is a summary of the main incentives offered under Puerto Rico’s Act 60. At our firm, we will help you understand the best options for you and guide you on meeting eligibility requirements.”

Resident Individual Investor Incentives (Chapter 2):

  • ➤ 4% Income Tax Rate on earnings from export services
  • ➤ 0% Tax on Dividends and Interest for Puerto Rican residents
  • ➤ 0% Capital Gains Tax on capital gains accrued after moving to Puerto Rico
  • ➤ 0% Capital Gains Tax on capital gains accrued after moving to Puerto Rico
  • ➤ The initial decree is granted for a term of 15 years and may be extended for an additional 15 years.
To qualify for tax benefits under Chapter 2 of the Incentives Code, an applicant must be a bona fide resident of Puerto Rico for the entire tax year.
Chapter 2 applies to any individual investor who becomes a resident of Puerto Rico on or before the tax year ending December 31, 2035, provided the individual was not a resident of Puerto Rico at any time between January 17, 2006, and January 17, 2012.

As per the U.S. Internal Revenue Code (Sections 933 and 937), a bona-fide resident of Puerto
Rico is a person who meets the following tests:

1) Presence Test – The individual must meet one of the following: 

➤ Be present in Puerto Rico for at least 183 days during the calendar year. 

➤ Be present in the United States for no more than 90 days during the calendar year. 

➤ Have no earned income from U.S. sources (i.e., compensation for labor or personal services performed in the U.S. exceeding $3,000) and spend more days in Puerto Rico than in the United States. 

➤ Be present in Puerto Rico for at least 549 days over a three-year period, including the current tax year and the two preceding years, with a minimum of 60 days in Puerto Rico each year. 

➤ Have no “significant connection” to the United States.

2) Tax Home Test – The individual’s primary place of business, or main location if they have more than one, must be in Puerto Rico for purposes of determining income tax deductions for travel expenses incurred while away from home for business. To satisfy the tax home requirement, the individual must spend significantly more time working from their office in Puerto Rico than from an office in the United States or any other foreign country.

3) Closer Connection Test – The individual must maintain a closer connection to Puerto Rico than to the U.S. or any other foreign country. This connection is assessed based on several factors, including but not limited to: the location of the individual’s permanent home, where their family resides, and where their personal belongings are kept. Additional factors include the location of social, political, cultural, or religious organizations they are affiliated with, where they conduct personal banking, and where they engage in business activities outside of their tax home. Other considerations include the location where they hold a driver’s license, where they vote, and the country of residence stated on official government forms and tax returns. The analysis of significant connections may also consider similar factors that demonstrate the individual has moved away from the United States.

➤ The individual must qualify as a “Resident Individual Investor” as defined in the Act and must maintain bona fide residency in Puerto Rico.

➤ Starting in the second year of the Grant’s effectiveness and throughout the exemption period, the grantee must make an annual contribution of at least $10,000 to nonprofit organizations in Puerto Rico. Under the code, half of this donation must go to nonprofits focused on eradicating child poverty in Puerto Rico, with the remaining half donated to a Puerto Rican charity of the grantee’s choice.

➤ Individual investors are required to purchase a real estate property in Puerto Rico to use as their primary residence within two years of the Grant’s approval. The property must remain their principal residence for the duration of the decree and cannot be rented out.

➤ Grantees are obligated to file an annual report with the Puerto Rico government, accompanied by a $5,000 filing fee.

Export Services & Export Commerce Incentives (Chapter 3):

  • ➤ 4% Corporate Income Tax Rate for businesses that export services outside of Puerto Rico.
  • ➤ 50% Exemption on Municipal Taxes for companies providing eligible export services.
  • ➤ 100% Exemption on Dividend Distribution for shareholders of eligible businesses.

➤ Chapter 3 of Act 60 applies to any entity with a bona-fide establishment in Puerto
Rico that is engaged in an eligible service for export.

➤ 4% Income Tax Rate for manufacturing and industrial businesses. 

➤ 75%-90% Exemption on Property Taxes for eligible businesses.

➤ 50% Exemption on Municipal Taxes for manufacturing companies.

Eligible services include but are not limited to:
➤ Consulting
➤ Investment banking
➤ Investigation and development
➤ Project management
➤ Advertising and public relations
➤ Engineering and architecture
➤ Centralized management
➤ Software development
➤ Call centers
➤ Creative industries
➤ Educational and training
➤ Hospital and laboratories
➤ Storage and distribution centers
➤ Electronic data processing
➤ Assembling, bottling and packaging
➤ Voice and data telecommunications

➤ Entities must request and obtain a tax exemption grant, which requires a $1,000 filing fee. Act 60 establishes that the grant is considered a contract between the individual or entity and the Government of Puerto Rico, meaning it cannot be unilaterally modified and will not be affected by amendments to Act 60 enacted after the grant is issued.

➤ Exempt businesses with actual or projected total revenue exceeding $3 million must employ at least one full-time employee, which can include the business owner.

➤ Grantees are required to file an annual report with the Puerto Rico government, and the
filing fee for the report is $500.

Other Incentives

➤ Up to 40% Tax Credit for eligible investments in tourism projects
➤ 90% Tax Exemption on property taxes for hospitality developments
➤ 100% Tax Exemption on imported materials and equipment for eligible projects

➤ 4% Income Tax Rate for companies engaged in renewable energy projects
➤ 75%-90% Exemption on Property and Municipal Taxes for eligible projects

➤ 4% Income Tax Rate for financial institutions or insurance companies engaged in eligible services
➤ 75%-90% Exemption on Property and Municipal Taxes for financial businesses

➤ 100% Exemption on Income Taxes, Property Taxes, and Municipal Taxes for eligible
agricultural activities
➤ Up to 50% Tax Credit for investments in agricultural businesses

➤ 40%-55% Tax Credit for production expenditures in Puerto Rico
➤ 90% Exemption on Municipal and Property Taxes for eligible projects

➤ 4% Income Tax Rate for financial institutions or insurance companies engaged in eligible services
➤ 75%-90% Exemption on Property and Municipal Taxes for financial businesses

➤ 100% Exemption on Income Taxes, Property Taxes, and Municipal Taxes for eligible
agricultural activities
➤ Up to 50% Tax Credit for investments in agricultural businesses

➤ 40%-55% Tax Credit for production expenditures in Puerto Rico
➤ 90% Exemption on Municipal and Property Taxes for eligible projects

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