Imagine waking up to the sound of ocean waves, the warm Caribbean breeze drifting through your window, and knowing that your financial future just got much brighter. For many entrepreneurs, investors, and remote workers, Act 60 has turned this dream into reality by offering incredible tax incentives for those willing to call Puerto Rico home. 

Whether you’re a startup founder seeking lower corporate tax rates, an investor looking to optimize capital gains, or a retiree eager to stretch your savings, Act 60 opens doors to opportunities that are hard to find elsewhere.

What is Puerto Rico’s Act 60?

Puerto Rico has a long history of offering tax incentives, especially for industries like pharmaceuticals and manufacturing. Nearly nine years ago, to accelerate Puerto Rico’s economic recovery, the government introduced tax incentives to attract businesses and investors. The goal was simple: bring more professionals to the island while strengthening its economy. Over time, these incentives evolved into what is now known as Act 60, a law that offers some of the most competitive tax benefits in the world.

For businesses and individuals willing to relocate, Act 60 provides a golden opportunity. But what exactly does Act 60 offer, and how can you qualify? Let’s explore the details below.

The Evolution of Act 60: From Act 20 to Today

Puerto Rico introduced Act 20, which offered a 4% corporate tax rate to businesses exporting services from the island. This law helped establish Puerto Rico as a hub for international consulting, finance, and other remote services.

Act 20 was replaced by Act 60, consolidating all tax incentives under one framework. While the 4% corporate tax rate remained, Act 60 introduced new requirements and stricter compliance measures. This ensured that businesses genuinely contributed to Puerto Rico’s economy while continuing to enjoy significant tax savings.[1]

Key Tax Benefits Under Act 60

Act 60 offers an impressive set of tax incentives for qualifying businesses and individuals. These benefits are designed to make Puerto Rico an attractive destination for entrepreneurs and investors.

1. Ultra-Low Corporate Tax Rate

One of the biggest draws of Act 60 is its 4% corporate tax rate, a significant reduction compared to the U.S. federal corporate tax rate of 21%. This applies to businesses that export services from Puerto Rico to clients outside the island.

For example, a consulting firm or a software company serving U.S. clients but operating from Puerto Rico can qualify for this substantial tax reduction. This allows businesses to reinvest more earnings while complying with local regulations.

2. Full Exemption on Dividends and Profit Distributions

Under Act 60, businesses benefit from a 100% exemption on dividends and profit distributions. This means that once your business generates income, you can take profits without paying additional taxes, something that is unheard of in most jurisdictions.

For investors and business owners, this creates an ideal environment for wealth accumulation and reinvestment, making Puerto Rico a preferred destination for financial growth.

3. Property and Municipal Tax Exemptions

Act 60 extends its benefits beyond income tax, offering significant property tax exemptions:

• 75% exemption on local and state property taxes
• 50% exemption on municipal taxes
• Full tax exemption for small and medium-sized businesses during their first five years[2]

These exemptions help businesses reduce their operating costs, making it easier to establish a long-term presence in Puerto Rico.

Eligibility Requirements for Act 60

While Act 60 provides unparalleled tax benefits, not every business qualifies. The law has strict requirements to ensure compliance and prevent misuse.

1. Business Operations Must Be Based in Puerto Rico

To qualify, businesses must operate physically in Puerto Rico while serving clients outside the island. This means that a business cannot sell products or services to Puerto Rican residents and still claim Act 60 benefits.

For example, if you run an e-commerce consulting firm that helps businesses in the U.S., your operations can be based in Puerto Rico, but your clients must be outside the island.

2. Business Owners and Employees Must Pay Local Income Taxes

Even though businesses enjoy a 4% corporate tax rate, any salary paid to owners and employees is subject to Puerto Rico’s standard income tax rates, which can go as high as 33%. This ensures that the island benefits from personal income tax contributions.

3. Annual Compliance and Audits

Act 60 businesses must comply with regular audits by the Office of Industry Tax Exemption (OITE). These audits ensure that companies are genuinely operating from Puerto Rico and not just using it as a tax shelter.

Additionally, businesses earning more than $3 million per year must employ at least one Puerto Rican resident in a core business role.[3]

At Tax Law and Venture Services, we help businesses navigate these compliance requirements, ensuring they stay eligible for Act 60 benefits.

Who Doesn’t Qualify for Act 60?

While Act 60 is open to many industries, certain businesses and activities do not qualify for tax benefits.[4]

1. Businesses Serving Puerto Rico-Based Clients

If your company provides services to customers within Puerto Rico, you won’t qualify for Act 60 incentives. The law is strictly for export services, meaning your clients must be outside Puerto Rico.

For example, a marketing agency serving Puerto Rican businesses would not qualify. However, if that same agency worked with clients in the U.S. or Europe, it would be eligible.

2. Companies Engaged in Government Lobbying or Consulting

Businesses that provide consulting or lobbying services to the Puerto Rican government or its agencies do not qualify for Act 60. The law is designed to promote private sector investment, not government-related activities.

3. Businesses Selling Goods for Local Consumption

If your business sells physical products in Puerto Rico, you won’t qualify for Act 60’s tax incentives. The law is intended to boost exported services, not local retail or manufacturing.

For instance, if a company sells electronics within Puerto Rico, it would be ineligible for Act 60 benefits. However, an online business selling to U.S. customers would still qualify.

Final Thoughts

Act 60 has transformed Puerto Rico into a highly attractive destination for entrepreneurs, service providers, and investors looking to minimize taxes while enjoying a Caribbean lifestyle.

By offering a 4% corporate tax rate, full dividend exemptions, and property tax breaks, the law has encouraged thousands of professionals to relocate their businesses to the island. However, compliance is key, and businesses must ensure they meet all eligibility requirements to maintain these tax benefits.

At Tax Law and Venture Services, Roxana and her team specializes in helping businesses and investors navigate Act 60, ensuring full compliance while maximizing tax savings. If you’re considering moving your business to Puerto Rico, now is the time to take advantage of these unmatched incentives.

Thinking about relocating your business to Puerto Rico? Schedule a 1-hour consultation today and get expert advice on making the most of Act 60. Contact us today for a personalized consultation.

FAQs

What Are the Tax Benefits of Act 60 in Puerto Rico?

Act 60 offers a 4% corporate tax rate for qualifying businesses, a 100% exemption on dividends and profit distributions, and significant property and municipal tax exemptions. These incentives make Puerto Rico an attractive destination for entrepreneurs and investors.

What Are the Tax Benefits of Puerto Rico Residency?

Individuals who establish Puerto Rico residency under Act 60 can benefit from a 0% capital gains tax on assets acquired after moving, along with zero federal income tax on Puerto Rico-sourced income. This provides substantial tax savings for high-net-worth individuals and investors.

What Is the Act 60 Puerto Rico Donation?

Act 60 requires individuals benefiting from its tax incentives to make an annual charitable donation of $10,000 to a Puerto Rico-based nonprofit. This ensures that residents contribute to the island’s social and economic development.