Puerto Rico Act 60 Requirements: Complete 2026 Checklist & Guide
Everything U.S. investors, entrepreneurs, and export businesses need to know about qualifying, applying, and maintaining compliance under Puerto Rico’s Act 60 — updated with all 2026 Act 60-2026 changes.
Dec 31, 2026
0% Rate Deadline
183 Days
Min. PR Presence/yr
$10K
Annual Donation (Ch.2)
2 Years
Property Purchase Window
What Is Act 60 Puerto Rico? The Foundation
Puerto Rico Act 60 — the Puerto Rico Tax Incentives Code (Act 60-2019) — consolidated Acts 20 and 22 into a single framework. It offers two primary benefit tracks: Chapter 2 for Individual Resident Investors and Chapter 3 for Export Services businesses. Act 38-2026 extended the program through 2055 with critical structural changes.
Enacted:
2019 — consolidated Acts 20 & 22
Extended:
Through 2055 by Act 38-2026 (signed March 2026)
Administered by:
DDEC — Dept. of Economic Development & Commerce
Decree type:
Legally binding 15-year contract with PR Government
Key chapters:
Ch.2 = Individual Investors · Ch.3 = Export Businesses
0% deadline:
Apply before Dec 31, 2026 for 0% capital gains rate
Act 60 Individual Resident Investor Requirements (Formerly Act 22 Puerto Rico)
Chapter 2 targets U.S. individuals who relocate to Puerto Rico and want to benefit from 0% capital gains, 100% dividend/interest exemption, and IRC §933 federal exclusion. All eight requirements below must be met and maintained continuously.
01
183-Day Physical Presence Test
Spend a minimum of 183 days per year physically present in Puerto Rico. Tax authorities may review available documentation and records when evaluating residency claims. Maintaining sufficient documentation of physical presence is an important component of Act 60 compliance.
02
Tax Home Test
Your primary place of business must be in Puerto Rico. Maintaining a U.S. business, office, or significant income stream from the mainland without proper restructuring can invalidate this test.
03
Closer Connection Test
You must demonstrate stronger personal and financial ties to Puerto Rico than to any other location — including driver's license, bank accounts, professional registrations, social ties, and community involvement.
04
Property Purchase (2-Year Rule)
Within 2 years of receiving your decree, you must purchase real property in Puerto Rico for use as your principal residence. This is a binding requirement — Failure to satisfy this requirement may affect compliance with decree obligations.
05
Annual Charitable Donation ($10K)
Donate a minimum of $10,000/year to PR-based nonprofits certified under the PR IRC. At least half must go to organizations combating child poverty. Documentation is mandatory in every annual report.
06
DDEC Annual Report + $5K Fee
File a comprehensive Annual Report with DDEC each year and pay the $5,000 filing fee. The 2026 enhanced portal requires certified CPA letters, income source breakdowns, and residency proof.
07
Puerto Rico Tax Return Filing
File an accurate Puerto Rico income tax return each year, correctly classifying all Act 60-eligible income. Misclassification of pre-move vs. post-move gains is a federal fraud risk.
ACT 38-2026 UPDATE:
Act 38-2026 introduced changes affecting certain Act 60 tax benefits and application timelines. The tax treatment available to a taxpayer may depend on the type of decree obtained, the application date, and other eligibility requirements. Prospective applicants should seek current legal and tax advice before relying on any specific tax rate or incentive.
Act 60 Export Services & Commerce Requirements (Formerly Act 20)
Chapter 3 covers businesses that export services from Puerto Rico to clients outside the island — delivering the 4% flat corporate tax, 100% dividend exemption, and other exemptions. Your Corporate and Tax Attorney must structure your entity properly to qualify.
Who Typically Qualifies
- Research & development / consulting
- Technology, software, SaaS platforms
- Advertising, PR & marketing services
- Investment banking & financial services
- Blockchain, crypto & Web3 advisory
- Manufacturing & industrial (Ch.6)
- Creative industries: design, apps, gaming
- Professional services: legal, medical, accounting
- Call centers & customer service operations
Common Disqualifiers
- Services with direct Puerto Rico nexus
- Construction for Puerto Rico customers
- Reselling to PR-based end customers
- Services to clients conducting PR business
- Activities without proper export documentation
- Operations without a bona fide PR office
Business Requirements — The 4 Core Obligations:
Bona Fide PR Office
A legitimate office with genuine business operations in Puerto Rico — not just a mailing address or registered agent. Required for both DDEC application and IRS substantiation.
Employee Requirement
Businesses with annual revenue over $3M must hire ≥1 full-time Puerto Rico resident employee. The owner/employee may count towards this requirement.
DDEC Decree Application
Apply for your Tax Exemption Decree with DDEC's Incentives Office. Include a detailed description of the export service, business plan, and economic projections.
Annual Report + $5K Fee
File an annual compliance report with DDEC documenting all business activity, employment, Act 60-eligible revenue, operational information, and the income tax return and other tax filings.
Tax Benefits at a Glance:
4%
Flat corporate tax on eligible export income
100%
Dividend exemption from export profits
75%
Exemeption on Property Taxes
50%
Exemption on Municipal Taxes
How to Apply for an Act 60 Decree: Step-by-Step
The Act 60 decree application is filed with DDEC. Processing typically takes 60–120 days. Working with a Puerto Rico tax lawyer can help applicants navigate eligibility requirements, documentation, compliance obligations, and decree applications.
Step 1
Confirm Eligibility
Assess whether Chapter 2 or Chapter 3 applies. Review income types, residency capacity, and business activities with a qualified Act 60 attorney. An inappropriate structure may affect eligibility or limit available benefits.
Step 2
Structure Your Entity
For Ch.3: Establish the correct business or corporate structure (LLC, Corp, etc.) and establish a bona fide PR office. For Ch.2: Begin physical presence in Puerto Rico and take steps to establish closer connections and a tax home in Puerto Rico.
Step 3
Prepare Application
Compile: personal/financial information, sworn residency intent, business plan (Ch.3), projected economic impact, income source documentation, and all required government declarations.
Step 4
File with DDEC
Submit the application to DDEC with applicable attachments and pay the required filing fee. DDEC reviews and may request additional information.
Step 5
Execute Decree
Once approved, carefully review all terms of the decree and accept it— this is a binding contract. The decree guarantees your specific tax rates for 15 years, regardless of future changes in law.
Step 6
Maintain Compliance
File annual reports, income tax returns, and other applicable tax and business filings, and meet all the tax grant requirements.
Annual Act 60 Compliance Requirements — Keep Your Decree Protected
Receiving your Act 60 decree is only the beginning. Ongoing compliance is mandatory. Missed deadlines or gaps in
documentation may affect compliance status and could result in administrative consequences depending on the circumstances.
CRITICAL
File DDEC Annual Report
File by the annual deadline with residency proof, donation records, income source breakdown, and 2026 CPA-certified statements.
REQUIRED
File the Annual REport on TIme
File the Annual Report on time. Late filing triggers penalties or a decree of suspension.
REQUIRED
$10,000 Charitable Donation (Ch.2)
For individual resident investors, donate to PR nonprofits. Document all donations with receipts.
ONGOING
Maintain Primary Residence
For Individual Resident Investors, Puerto Rico must be your home. Monitor residency compliance every year.
ANNUAL
File Puerto Rico Tax Return
File an accurate PR income tax return each year. Consider working with a CPA familiar with Puerto Rico tax incentive programs and compliance requirements.
Act 60 Compliance and Enforcement Considerations
Federal and Puerto Rico tax authorities continue to review Act 60 compliance, particularly regarding residency, sourcing of income, and reporting obligations. Individuals and businesses should maintain appropriate documentation and seek professional guidance when needed. Audits are increasing. The 2026 crypto disclosure requirements add another layer of enforcement. Working with a qualified Puerto Rico tax lawyer is essential protection.
IRS ENFORCEMENT NOTICE: In 2021 the IRS launched a formal Act 60 enforcement campaign. In 2025, Congress expanded IRS-Puerto Rico data sharing. In 2026, mandatory crypto wallet disclosures were added. The IRS has publicly stated many taxpayers claim Act 60 benefits without genuinely relocating.
Insufficient Physical Presence
Failing to satisfy applicable residency requirements may increase the likelihood of additional review. Tax authorities may consider a variety of records and documentation when evaluating residency claims. Maintaining accurate records is important when demonstrating compliance with residency requirements.
Maintaining U.S. Business Ties
Continuing to manage or receive income from a U.S.-based business without proper restructuring suggests your tax home remains in the U.S., invalidating residency claims under IRC §937(a).
Misclassifying Pre-Move Gains
Capital gains on assets that appreciated BEFORE your move to PR are still subject to U.S. federal tax. Only post-residency appreciation is exempt. Misclassifications may cause problems with tax authorities.
Missing Annual DDEC Reports
Failure to file DDEC annual reports is a direct compliance violation that triggers both IRS and HACIENDA scrutiny and can lead to formal decree revocation proceedings.
Inadequate Business Substance
Chapter 3 businesses operating as 'shell' offices without genuine employees, operations, or client activity may face IRS and DDEC challenges.
Act 60 Tax Benefits of Puerto Rico: Full Summary by Chapter
Understanding the tax benefits of Puerto Rico under Act 60 is what drives the application decision. Here is every benefit, by chapter, in one place.
Chapter 2 — Individual Investor
Chapter 3 — Export Services
Additional Incentives
A 0% tax rate on post-residency gains • A 100% exemption from PR income tax on dividends • 100% exemption on interest income • IRC §933 federal exclusion for PR-source income •
• A 4% flat corporate income tax on eligible export income • 100% dividend exemption from export profits • 75% property tax exemption on business property • 50% exemption on municipal taxes.
Blockchain/crypto income: May be eligible for export services classification • Renewable energy, Tourism development: iand Manufacturing under Act 60: 4% rate + 75% property exemption • R&D credits: up to 50% on qualifying expenses
Frequently Asked Questions: Act 60 Puerto Rico Requirements
What are the basic Act 60 requirements to qualify in 2026?
To qualify under Chapter 2 (Individual): establish bona fide PR residency (183+ days/year), purchase PR property within 2 years, donate $10,000/year to PR nonprofits, and file DDEC annual reports. For Chapter 3 (Business): maintain a bona fide PR office, export services to non-PR clients, obtain a DDEC tax exemption decree, and meet employment thresholds.
What is the significance of Act 38-2026?
Act 38-2026 introduced amendments affecting certain Act 60 incentives and extended portions of Puerto Rico’s incentives framework through 2055. The impact of these changes varies depending on the applicable decree category, filing date, and individual circumstances. Taxpayers should consult current legal and tax guidance to understand how the law applies to their specific situation.
How many days must I spend in Puerto Rico for Act 60?
A minimum of 183 days of physical presence in Puerto Rico per year is required. You must simultaneously pass two additional federal tests: the Tax Home Test (primary place of business in PR) and the Closer Connection Test (stronger ties to PR than any other location). All three tests under IRC §937(a) must be satisfied. Failing even one test can invalidate your bona fide
residency claim.
What is the annual charitable donation requirement under Act 60?
Chapter 2: Individual Investors must donate a minimum of $10,000 per year to Puerto Rico-based nonprofit organizations certified as such by the Puerto Rico Treasury Department. Donations must be documented annually in your DDEC compliance report. Failure to make or properly document this contribution is a common reason for decree non-compliance.
Does Act 60 cover crypto and digital asset income?
Yes — for both chapters. Chapter 2: Individual investors with post-residency cryptocurrency gains pay 0% PR capital gains tax (4% if applying after Dec 31, 2026). Chapter 3: Crypto businesses that provide advisory or blockchain services qualify as Export Services for the 4% corporate rate.
Can my Act 60 decree be revoked — and how?
Yes. Common revocation triggers: failing the 183-day test, not purchasing PR property within 2 years, missing annual charitable donations, failing to file DDEC reports, maintaining a U.S. tax home, and misclassifying pre-move gains as post-residency gains. IRS enforcement has intensified significantly since 2021 and expanded further in 2025–2026. Professional legal and tax guidance may help taxpayers understand eligibility requirements, reporting obligations, and ongoing compliance responsibilities.
What does the DDEC Annual Report require in 2026?
In general, annual reports require: (1) a copy of the income tax returns and other tax filings; (2) in the case of IRI, proof of residency documentation; (3) a detailed breakdown of income sources and Act 60-eligible activities; (4) charitable donation receipts (Chapter 2); and (5) the annual filing fee. Late or incomplete filings trigger penalties.
Do I need a Puerto Rico tax lawyer to apply for Act 60?
While not legally mandated, attorney representation is strongly recommended. Act 60 decrees are legally binding contracts — errors in structuring, entity formation, income classification, or residency planning can result in denied applications, IRS audits, or revocation of a permanent decree.
Discuss Your Act 60 Eligibility and Compliance Strategy
Tax Law Ventures helps individuals, investors, and businesses evaluate Act 60 opportunities, navigate compliance requirements, and understand the application process.