Puerto Rico offers the most aggressive tax benefits package in the entire United States territory. If you're a business owner, investor, or high-income professional, Act 60 may be the most strategic jurisdiction within the US to legally reduce your taxes by up to 90% -- without giving up your American citizenship.

This guide covers everything you need to know before making the move: what Act 60 is, the real benefits in numbers, residency requirements, the complete process, common mistakes, and -- most importantly -- how the property you choose plays a critical role in maintaining your tax status.

What is Act 60

Act 60 (Law 60-2019), officially known as the Puerto Rico Incentives Code, consolidates more than 70 previous tax incentive laws into a single code. For individual investors and entrepreneurs, the two most important sections are:

Chapter 2 -- Individual Investors (formerly known as Act 22)
Chapter 3 -- Export Services (formerly known as Act 20)

Both aim to attract capital, talent, and businesses from the US mainland to Puerto Rico, offering incentives that don't exist anywhere else within US territory.

Chapter 2: Individual Investors

This chapter is aimed at individuals who generate income from capital gains, dividends, and interest -- commonly known as passive investment income.

Chapter 2 Benefits

0% tax on long-term capital gains on assets appreciated after establishing bona fide residency in Puerto Rico
0% tax on dividends generated from Puerto Rico sources
0% tax on interest generated in PR

For context, in mainland US these rates are:

Long-term capital gains: 20% + 3.8% NIIT = 23.8%
Plus state taxes: up to 13.3% additional in California
Real total in California: up to 37.1%

An investor with $1 million in capital gains would go from paying $371,000 in California to paying $0 in Puerto Rico. That kind of savings changes lives.

Chapter 3: Export Services

This chapter is aimed at entrepreneurs and professionals who provide services to clients outside of Puerto Rico. If your business is digital, advisory, creative, or tech-based, and your clients are on the mainland or international, you likely qualify.

Qualifying Services

Consulting, advisory, and coaching
Professional services (legal, accounting, engineering)
Software development and SaaS
Digital marketing, advertising, creative services
Research and development services
Trading, asset management, hedge funds
Call centers and shared services
Educational and training services
Specialized medical services

Chapter 3 Benefits

4% corporate tax rate on eligible export service income
0% tax on dividends paid by the company to its owners (you)
75% exemption on municipal and property taxes for the business
100% exemption on ordinary PR state taxes (11.5%)

Compare with mainland rates: a business owner making $1 million in California pays ~37% federal + 13.3% state = ~50%. In Puerto Rico under Chapter 3: 4%. The annual difference is nearly $460,000.

The 3 Residency Tests

To qualify as a bona fide resident of Puerto Rico (an indispensable requirement for Act 60), you must meet the three tests established by the IRS:

Test 1: Physical Presence

You must be physically present in Puerto Rico for at least 183 days during the tax year. This test is mathematical -- you either meet it or you don't. It can be demonstrated with:

Flight boarding passes
Credit card records
Cell phone data (location history)
Local payroll records
Utility bills

There are also 3 alternative tests if you don't reach 183 days, including the "549 days in 3 years test" which offers more flexibility for frequent travelers.

Test 2: Tax Home

Your tax home -- the primary place where you conduct your business or work -- must be in Puerto Rico throughout the entire tax year. If you maintain an active office, employees, or primary clients on the mainland, this can compromise your status.

In practice, this means your business must be legally established in PR (PR LLC or PR C-corp), with verifiable address, phone, and operations.

Test 3: Closer Connection (The most critical)

You must have a closer connection to Puerto Rico than to any other state or country. The IRS evaluates factors such as:

Location of your primary residence (and whether you bought it)
Location of your immediate family (spouse, children)
Location of your personal belongings and furniture
Social, cultural, religious organizations you participate in
Bank where you hold your primary account
Driver's license and vehicle registration
Voter registration
Where you practice your profession

This is the most subjective test, but also the most determinative. Buying a property in Puerto Rico is the most concrete proof of closer connection -- it demonstrates real intent to put down roots, not just temporary presence.

The Critical Role of Qualifying Property

One of the least-discussed requirements of Act 60 Chapter 2 is that you must acquire residential property in Puerto Rico within 2 years of receiving your decree. The property must:

Be used as your primary residence
Be registered in the name of the decree beneficiary
NOT be rented to third parties -- it must be occupied by you or your immediate family
Meet the minimum investment requirements established by the decree

This means you can't just "move" into a rented apartment. You must buy -- and the property must meet specific legal requirements to maintain your tax status in case of an eventual audit.

As a specialist in Act 60 qualifying properties, I help my clients identify properties that:

Meet the minimum investment requirements of the decree
Are in strategic areas for investors (Dorado, Condado, Palmas del Mar, Guaynabo, Isla Verde)
Have high-level infrastructure for remote work (fiber optic, generator, cistern)
Are defensible in case of IRS or PR Treasury audit
Have appreciation potential for when you decide to sell (under 0% capital gains)

Real Numbers: Savings Example

Let's take a concrete case. Imagine a digital entrepreneur generating $1,000,000 annually in marketing services and SaaS consulting from California.

Scenario A: California (without moving)

Federal income tax (37% top bracket): $370,000
California state tax (13.3%): $133,000
Self-employment / additional NIIT: ~$38,000
Total taxes: ~$541,000
Net income: ~$459,000

Scenario B: Puerto Rico under Act 60 Chapter 3

PR corporate tax (4%): $40,000
Dividend tax (0%): $0
Federal tax (excluded by bona fide residency): $0
Total taxes: $40,000
Net income: $960,000

Annual savings: $501,000. In 5 years: $2.5 million. In 10 years: $5 million -- enough to pay cash for two or three properties in Dorado.

And that doesn't even include capital gains on new assets accumulated during your residency (0% under Chapter 2).

The Complete Process Step by Step

Step 1: Initial Consultation and Assessment

We evaluate your situation: income type, current structure, clients, goals. We determine if Act 60 is the right strategy for you.

Step 2: Tax Strategy with Specialist CPA

I connect you with specialist Act 60 CPAs and attorneys. They design the optimal structure for your business and prepare the decree application.

Step 3: Decree Application

You submit the application to the Puerto Rico Office of Incentives (DDEC). The process takes 3-6 months. There's an initial fee and an annual fee upon receiving the decree.

Step 4: Qualifying Property Search

While your application is in process, we start the property search. This gives you time to get to know zones, neighborhoods, and find the ideal property that meets requirements.

Step 5: Move and Establish Residency

You physically move, open local bank accounts, get a PR driver's license, register vehicles, and establish utilities in your name.

Step 6: Property Closing

We complete your qualifying property purchase within the 2-year legal deadline.

Step 7: Annual Status Maintenance

Each year you must meet the 183 days, file PR returns, and maintain documented connection. Your CPA handles this.

Common Mistakes to Avoid

In my experience working with Act 60 investors, these are the most frequent -- and most expensive -- mistakes:

Not buying property within the 2-year deadline. It can invalidate your decree.
Keeping tax home on the mainland. If you continue working primarily for mainland clients without structuring it through your PR entity, you lose the benefits.
Not tracking the 183 days. Use apps like TaxDay or a dedicated calendar.
Keeping primary accounts on the mainland. Transfer your primary banking to PR.
Underestimating the "closer connection" component. It's not just math -- it's your life.
Trying to apply pre-residency gains. Only applies to assets appreciated after establishing residency.
Not documenting everything. If the IRS audits, you need evidence: receipts, photos, passports, witnesses.

Tools and Resources

To help you make informed decisions, we have tools that can help:

Act 60 Calculator -- Calculate your estimated tax savings based on your current income and state
CRIM Calculator -- Estimate your property tax contribution in Puerto Rico
Mortgage Calculator -- With local bank rates, CRIM and insurance
Complete Act 60 page -- Requirements, benefits, and confidential consultation form
Neighborhood guides -- Compare Dorado, Condado, Guaynabo, Carolina and more

Next Steps

Act 60 isn't for everyone. If you generate less than $250,000 annually, the costs of the decree, the move, and maintaining the status likely exceed the savings. But if you're in the $500,000+ range in business income or capital gains, the math is compelling.

The first step is a confidential consultation where we review your specific situation, calculate your exact potential savings, and determine if your business type qualifies. No commitment.

Complete the form on the Act 60 page or contact me directly via WhatsApp at (787) 983-6678. I serve consultations from US mainland investors daily.

Christian Ortiz is a licensed broker in Puerto Rico (Lic. C-26177) specializing in Act 60 qualifying properties. Active member of NAR, Puerto Rico Association of Realtors, and San Juan Board of Realtors.

This guide is informational and does not constitute legal or tax advice. Consult with a CPA and attorney specializing in Act 60 before making decisions. Benefits and requirements may change with law modifications.

Act 60 Puerto Rico: The Complete Guide for Mainland Investors 2026