If you’re a tech entrepreneur exploring tax-optimized growth opportunities, Act 60 Puerto Rico offers compelling incentives tailored to startups, especially those focused on global markets. With a low 4% corporate tax rate, exemptions on dividends and capital gains, and favorable operating conditions, the law presents a rare opportunity for tech startups to scale efficiently.

At Tax Law and Venture Services, we help startups navigate the technical and legal requirements to qualify under Act 60 Puerto Rico. In this post, we’ll walk you through the criteria, eligibility pathways, and critical operational mandates that tech founders should know heading into 2025.

How Tech Startups Can Qualify Under Act 60 Puerto Rico

Understanding and meeting Act 60 requirements is more than filing paperwork, it’s about structuring your startup legally and sustainably. Before applying, it’s important to evaluate eligibility, align your operations, and demonstrate that Puerto Rico is your startup’s principal hub.

Here are the key areas you must address to secure and maintain your benefits.

Establish Tax Residency in Puerto Rico

For any startup under Act 60 Puerto Rico, founders and key employees must meet the bona fide residency test, this includes three core components:

• Physical Presence: You must spend at least 183 days annually in Puerto Rico. Keep travel records, utility bills, and lease agreements to document presence.
• Tax Home: Your primary business activities must be conducted from Puerto Rico. Client meetings, development work, and management should be held on the island.
• Closer Connection: Your relationships, social networks, and legal identification should all align with Puerto Rico. This includes driver’s licenses, voting registration, local memberships, and family ties.

At Tax Law and Venture Services, we assist tech founders in understanding the documentation and lifestyle changes needed to meet residency requirements and stand strong in compliance reviews.

Designing the Right Legal Structure

Tech startups must carefully choose an entity structure under Act 60 Puerto Rico to ensure eligibility and scalability:

• Corporate Form: Most tech startups opt for a Puerto Rico-based LLC or corporation designated to operate under Act 60’s Export Services incentive.
• Export Services Scope: Your services, such as SaaS development, cloud solutions, or consulting, must be delivered to clients outside of Puerto Rico. Domestic sales could nullify benefits.
• R&D and Innovation Classification: Startups developing software, AI, fintech, or other innovations can often qualify for additional benefits by positioning as R&D-oriented operations.

Our team structures your startup’s articles of incorporation, verifies operation modules, and selects the optimal incentive pathway under Act 60 Puerto Rico.

Submitting a Complete Application for Decree

Securing the Act 60 decree requires detailed documentation, including:

• A Business Plan, financial projections, and employment projections.
• Proof of Physical Location (e.g., leased office space or co-working agreements)
• Identity Documents of founders and key staff
• Residency Proof (lease, bills, travel logs)

After you apply, Puerto Rico’s Office of Incentives for Strategic Projects (OIPI) reviews and approves, typically in 6–12 months. Tax Law and Venture Services helps prepare and submit robust applications, increasing your chances of fast approval.

Operational Compliance and Substance Requirements

Once approved, you must deliver on these operational mandates for Act 60 Puerto Rico startups:

• Employee Hiring: You must have at least one full-time Puerto Rico-based employee. Growth startups may require more, depending on revenue.
• Physical Facility: Maintain a legitimate location for operations, whether co-working space or leased office.
• Revenue Sourcing: Generate most, if not all, revenue from outside Puerto Rico. Ensure contracts and invoices reflect that. A transfer pricing analysis is recommended if services are provided to related entities or between affiliates. 
• Recordkeeping: Maintain financial records, bank statements, payroll, licenses, in compliance with local accounting standards.

Our firm provides HR, accounting, and compliance support to ensure your startup remains fully operational under Act 60.

Annual Reporting and Compliance Audits

Eligible tech businesses under Act 60 Puerto Rico must file annual reports and stay audit-ready:

• An Annual Report outlines residency, business activity, job creation, and financial metrics.
• Puerto Rico Income Tax Returns must be submitted—even exempt income must be declared.
• IRS and other U.S. Filings may be required for founders with U.S.-source income or foreign assets.

Missed filings can lead to penalties or revocation of your decree. At Tax Law and Venture Services, we manage your annual compliance to secure your benefits year after year.

Leveraging Intellectual Property and R&D Credits

Tech startups often generate value through intellectual property. Under Act 60 Puerto Rico:

• R&D credits may be applied to innovation-related payroll, software development, and equipment costs.
• Income from IP developed and owned in Puerto Rico may be eligible for tax advantages beyond standard incentives.

Our team is proficient in integrating IP planning and incentive alignment into your broader Act 60 strategy to maximize return on innovation.

Planning for Scalability and Exit

Part of minimizing tax liability is having a clear long-term goal:

• Business Growth: As you scale, additional employment or infrastructure may unlock further economic incentives.
• Capital Gains Treatment: Founders who maintain residency may qualify for 0% capital gains tax on the sale of startup equity if structured properly.
• Exit Strategy: Whether you plan M&A, acquisition, or shareholder transition, prior structuring under Act 60 can optimize outcomes.

At Tax Law and Venture Services, we guide startups through scaling and exit planning designed to preserve benefits under Puerto Rico Act 60.

Conclusion

Act 60 Puerto Rico offers groundbreaking tax incentives for tech startups that are properly structured and compliant. To legally minimize tax liabilities, you need to master residency planning, entity formation, operational substance, and annual reporting.

At Tax Law and Venture Services, we support every stage—from application to audit preparation and long-term strategy. Contact us today to discuss how your startup can thrive under Act 60 Puerto Rico. Book your consultation now.

Frequently Asked Questions

1. Can a SaaS startup based in Puerto Rico benefit under Act 60?

Yes, if the business is incorporated and operated from Puerto Rico and serves clients outside of the island.

2. How many full-time employees are required?

Typically at least one Puerto Rico-based employee is required, though larger startups may need more.

3. What happens if I miss a P.R. filing?

Late or missing filings can result in penalties or even revocation of your Act 60 benefits, so prompt compliance is critical.