Applying for Act 60? Discover six mistakes that could slow down your approval and how to avoid them, whether you’re an individual investor or business owner.

While thousands of individuals have successfully secured approval under Act 60, others face delays or denials due to incomplete or inaccurate information. Although Act 60 provides significant tax benefits for both individuals and businesses, approval isn’t automatic—it requires meeting a clear set of legal and procedural requirements. Below, we’ll walk through common mistakes applicants make so you can avoid unnecessary delays and start building your new life on the island with confidence.

Mistake #1: Not Meeting the Physical Presence Test

If you’re an individual investor planning to relocate to Puerto Rico, you must meet the requirements of the 183-day rule to qualify for Act 60’s individual tax benefits. This means:

• You spend at least 183 days physically in Puerto Rico each year
• Your tax home is established in Puerto Rico
• You have a closer connection to Puerto Rico than to any other jurisdiction

To demonstrate a closer connection, you might:

• Own or lease a home in Puerto Rico
• Live with your family on the island
• Move your banking and financial accounts to Puerto Rico
• File your taxes as a Puerto Rico resident

Failing to meet this test can disqualify you from receiving the individual tax incentives under Act 60.

Mistake #2: Confusing Individual and Business Decrees

Act 60 is a combination of two former laws (Act 20 and Act 22), and many applicants don’t realize that there are two separate tax decrees under this updated program. To avoid delays, it’s important to apply under the correct chapter based on your situation.

• Individual Resident Investor: For individuals who relocate to Puerto Rico and want preferential tax treatment on dividends, capital gains, and interest income under Act 60’s current terms.
• Export Services Business: For businesses based in Puerto Rico that provide services to clients outside the island and want to benefit from the 4% corporate tax rate.

You can apply for both, but only if you meet all of the eligibility requirements for each.

Mistake #3: Skipping Annual Reports

To stay compliant with Act 60, both individuals and business owners are required to file an annual compliance report with the Department of Economic Development and Commerce (DDEC). This report typically includes financial statements, proof of income, and tax return information. Failing to submit it can result in administrative fines, and in some cases, the loss of your tax decree altogether.

Mistake #4: Not Making the $10,000 Donation (Individuals Only)

Individual resident investors are required to donate $10,000 annually to eligible Puerto Rico nonprofits they are not affiliated with. This requirement exists for several key reasons:

• Support for local communities: The donation helps fund nonprofit organizations that provide services to Puerto Rican residents.
• Shared responsibility: It ensures individuals receiving tax benefits are also contributing to the island’s social and economic well-being.
• Legal compliance: Making this donation is part of the annual requirements under Act 60 and helps you avoid penalties or the risk of losing your decree.

Mistake #5: Not Operating a Qualifying Export Service Business

If you’re applying under the Export Services Incentive, your business must provide eligible services to clients outside of Puerto Rico. These services fall under specific categories approved by the DDEC. Some common examples include:

• Creative and digital services such as graphic design, app development, or software engineering
• Research and development (R&D), including scientific research, biotech work, or technological innovation
• Manufacturing-related support like product design, testing, or refining goods that are distributed internationally

To qualify, your business must not primarily serve clients in Puerto Rico, as doing so would make it ineligible under Act 60.

Mistake #6: Submitting an Incomplete Application

Missing documentation or incomplete forms are one reason Act 60 applications can get delayed. Some overlooked items might include:

• A copy of your lease in Puerto Rico
• Proof of funding
• Nonprofit donation plans (for individual investors)
• An organizational chart or business plan (for export service businesses)

To avoid setbacks, it’s best to review your application with a trusted expert who can help you confirm that every required detail is included.

Don’t Let Paperwork Hold You Back

Getting Act 60 approval can be a rewarding financial decision, but only if done correctly. Whether you’re applying as an individual investor, a business owner, or both, avoiding common mistakes can save you time, stress, and money. If you’re ready to take advantage of the tax incentives that Puerto Rico has to offer, give us a call—we can help you get started right away.