Tax Incentives in Puerto Rico
Discover the extraordinary tax benefits available to individuals and businesses relocating to Puerto Rico through Act 60.
Act 60 Tax Incentives
Puerto Rico offers extraordinary tax incentives that make living and working on the island more enticing than ever for U.S. citizens. These incentives create a sense of urgency for investors to move to Puerto Rico and bring their businesses here.
On July 1, 2019, Puerto Rico enacted legislation providing tax incentives for U.S. citizens that become residents of Puerto Rico. Of particular interest are Chapter 2 of Act 60 for Resident Individual Investors and Chapter 3 for Export Services, which shield new residents who live in Puerto Rico for at least half the year from paying most federal income taxes.
Individual Investor Benefits
Chapter 2: Resident Individual Investor
Chapter 2 of Act 60 for Resident Individual Investors seeks to attract individual investors by relocating to the Island. These new residents of Puerto Rico are entitled to 100% income tax exemption on dividends, interest and certain capital gains.
Although Puerto Rico is a U.S. territory, pursuant to section 933 of the U.S. Internal Revenue Code, bona fide residents of Puerto Rico are not subject to federal income taxes on Puerto Rico source income, but they continue to be subject to federal income taxes on income that is not sourced in Puerto Rico.
Key Incentives
- •100% exemption from Puerto Rico income taxes on interest and dividends
- •100% exemption from Puerto Rico income taxes on all short-term and long-term capital gains generated after becoming a bona-fide resident
- •Individual investors can establish revocable or irrevocable trusts treated as grantor trusts for Puerto Rico tax purposes
- •Investors may transfer or bestow freely all or some of their assets to the above-mentioned trusts
- •Foreign trusts duly created under foreign laws will be considered valid in Puerto Rico
Business Benefits
Chapter 3: Export Services and Commerce
Chapter 3 of Act 60 for Export Services and Commerce is intended to promote the exportation of services and commerce by providing great resources and opportunities for U.S. companies to bring their business to Puerto Rico to establish a trade and service center for the World.
Services must be provided in Puerto Rico for customers outside Puerto Rico. The eligible service provided must not have a nexus with Puerto Rico; it cannot be related to the conduct of the trade, business or other activity of the customer in Puerto Rico.
Key Business Incentives
- •Fixed Income tax rate of 4%
- •100% income tax exemption for distributions from earnings and profits
- •75% property tax exemption for real property used in the Export Business
- •75% property tax exemption for personal property used in the Export Services business
- •50% exemption from municipal taxes
Eligibility Requirements
For Individual Investors
To benefit from Chapter 2 of Act 60, an individual must submit an online application through the Single Business Portal (SBP) online application platform. The government will issue a tax exemption decree that will provide a full detail of tax rates and conditions mandated by Act 60. This decree will be considered a contract between the Government of Puerto Rico and the applicant.
Once granted benefits, these will be guaranteed during the term of the decree, regardless of subsequent changes to the applicable Puerto Rico tax laws. The Resident Individual Investor decree will be valid until December 31, 2035.
For Export Services Businesses
To become exempt, the business needs to apply for a tax concession via a tax exemption decree considered a contract with the Office of Incentives for Businesses of the Government of Puerto Rico. The decree will be secured during a term of 15 years with a possible 15-year extension, regardless of subsequent changes to the law itself.
To qualify, the business cannot have any previous connections, dealings or nexus with Puerto Rico.
Eligible Export Services Activities
Professional Services
- •Legal services
- •Tax and accounting
- •Consulting services
Technology
- •Computer software development
- •Call centers
- •Telecommunications
Creative Industries
- •Advertising
- •Public relations
- •Marketing centers
Financial Services
- •Investment Banking
- •Financial services
- •Shared service centers
Healthcare
- •Hospital and laboratory services
- •Medical tourism
- •Telemedicine
Education
- •Educational services
- •Training services
- •Research and development
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