Act 60 Puerto Rico Requirements: Complete Guide for Investors and Businesses

If you have ever looked at your tax bill and thought, “There has to be a smarter way,” you are not alone. This is exactly why Act 60 Puerto Rico has become one of the most talked-about tax incentive programs in the world. Entrepreneurs, investors, digital nomads, and high-net-worth individuals are all asking the same question: what are the real Act 60 Puerto Rico requirements, and do they actually work?

This guide breaks everything down in plain English. No legal fluff. No confusing jargon. Just a clear, human explanation of what Act 60 is, who qualifies, and what you must do to stay compliant.

What Is Act 60 and Why It Matters

Act 60, officially known as the Puerto Rico Incentives Code, consolidated multiple older tax laws into one unified framework. It replaced Act 20 (Export Services) and Act 22 (Individual Investors) under a single legal structure.

Why does this matter? Because Act 60 offers legally backed tax incentives that can reduce certain federal and local taxes to levels that are almost unheard of elsewhere. Think of it as a bridge between smart tax planning and real economic activity in Puerto Rico.

Who Should Consider Act 60 Puerto Rico

Act 60 is not for everyone, and that is a good thing. It is designed for people who are ready to make a real move, not just chase a loophole.

You should consider Act 60 if you are:

An investor with significant capital gains
A business owner offering services outside Puerto Rico
A manufacturer or industrial operator
A remote entrepreneur earning mobile income

If you are willing to relocate, operate compliantly, and contribute to the local economy, Act 60 can be a powerful tool.

Major Tax Incentives Under Act 60

Individual Investor Incentives

Qualified individual investors may benefit from:

0% tax on Puerto Rico–sourced capital gains
0% tax on dividends and interest (subject to conditions)

This alone explains why Act 60 has attracted hedge fund managers, crypto investors, and asset traders from around the globe.

Export Services Incentives

Service-based businesses that export services outside Puerto Rico can enjoy:

4% corporate income tax rate
100% exemption on dividends distributed from eligible income

Manufacturing and Industrial Incentives

Manufacturers may qualify for:

Reduced corporate tax rates
Exemptions on property taxes and municipal taxes
Special incentives for job creation and infrastructure investment

Core Act 60 Puerto Rico Requirements

Here is where most people get confused. Act 60 benefits are generous, but they come with strict requirements. Miss them, and the incentives can disappear fast.

Residency Requirements Explained

To qualify as an individual investor under Act 60, you must become a bona fide resident of Puerto Rico.

This is not symbolic residency. It is real life residency.

Bona Fide Resident Test

The IRS uses three tests to determine whether you are a bona fide resident:

Presence test
Tax home test
Closer connection test

You must pass all three.

Days-in-Puerto-Rico Rule

You generally need to spend at least 183 days per year in Puerto Rico. This is non-negotiable. Flights, receipts, and travel logs matter more than people think.

Tax Home Requirements

Your main place of business must be in Puerto Rico. If your economic life still revolves around the mainland, this test can fail quickly.

Closer Connection Test

Your personal and professional ties should point to Puerto Rico. This includes:

Primary residence
Driver’s license
Voter registration
Social and business relationships

Think of it like proving where your “life center” truly is.

Business Formation Requirements

If you are applying under the Export Services or Manufacturing categories, the requirements shift toward business substance.

Eligible Business Activities

Not all businesses qualify. Common eligible services include:

Consulting
Software development
Marketing services
Financial and advisory services

The key is that the services must be provided to clients outside Puerto Rico.

Office and Operational Presence

You must maintain a real office in Puerto Rico. Virtual addresses do not qualify. Employees, contractors, or management activities should be anchored locally.

Puerto Rico Bank Accounts

A local business bank account is required. Revenue from eligible activities must flow through this account to maintain transparency and compliance.

Accounting and Compliance Standards

Professional bookkeeping, annual financial statements, and timely tax filings are essential. Sloppy accounting is one of the fastest ways to lose Act 60 benefits.

Application Process Step by Step

Applying for Act 60 is not difficult, but it is procedural.

Required Documentation

Typically includes:

Personal identification
Business plans or service descriptions
Financial projections
Proof of Puerto Rico residency or intent to relocate

Government Fees and Timelines

Application fees vary by category but are generally reasonable compared to the long-term tax savings. Approval can take several weeks to a few months.

Approval and Grant Decree

Once approved, you receive a tax grant decree. This is your legal contract with the Puerto Rico government. Follow it closely.

Ongoing Compliance Obligations

Act 60 is not a “set it and forget it” program.

Annual Reports and Fees

You must file annual compliance reports and pay required fees to maintain your decree.

Charitable Contribution Requirements

Individual investors are required to make annual charitable donations to approved Puerto Rico nonprofits. This ensures direct economic and social contribution.

Common Mistakes to Avoid

The biggest mistakes include:

Spending too little time in Puerto Rico
Running businesses without real substance
Assuming federal taxes automatically disappear
Ignoring annual compliance filings

Act 60 rewards discipline, not shortcuts.

Act 60 vs Former Acts 20 and 22

Act 60 unified the rules but also increased oversight. While the incentives remain attractive, compliance standards are higher. In simple terms, Act 60 favors serious applicants over opportunists.

Is Act 60 Worth It in 2026 and Beyond

For the right person, yes. Act 60 is still one of the most competitive tax incentive programs available under U.S. jurisdiction. However, it only works if you are prepared to relocate, operate transparently, and commit long term.

If you treat it like a lifestyle and business decision rather than a tax trick, the benefits can be substantial.

Conclusion

Act 60 Puerto Rico requirements are strict, but they are clear. Residency, substance, compliance, and contribution form the foundation of the program. For investors and business owners willing to do things the right way, Act 60 offers a rare combination of tax efficiency and legal certainty.

Think of Act 60 as a partnership. Puerto Rico provides incentives, and you provide presence, investment, and economic activity. When both sides hold up their end, the results can be powerful.