Thinking of relocating to Puerto Rico? Act 60 still offers major tax savings in 2026. Learn about the latest updates, compliance rules, and benefits of moving to the island.

Puerto Rico’s Act 60 offers major tax advantages in 2026 without requiring U.S. citizens to give up their citizenship. Despite recent changes, it remains a good decision for those looking to reduce their tax burden by relocating. This article covers the latest updates and the most valuable incentives available now.

Overview of Act 60

Act 60 is a tax incentive program established in 2019 to attract entrepreneurs, investors, and business owners to Puerto Rico. It consolidates two earlier laws—Act 20 and Act 22—into one streamlined program.

The goal is to boost economic growth on the island by bringing in high-income individuals and new sources of capital. For entrepreneurs, Act 60 offers tax incentives on income, capital gains, and dividends, long-term savings, and much more.

To qualify, you’ll need to become a bona fide resident of Puerto Rico. This process involves:

• Spending at least 183 days per year on the island
• Establishing strong ties, such as owning property, having a local driver’s license, and making Puerto Rico your primary tax home

Updates to Act 60

In 2025, the governor Jenniffer González Colón introduced several key updates to Act 60 going forward, including:

• 4% Tax Rate Starting in 2026: New applicants as of January 1, 2026, will be taxed at 4% on capital gains, interest, and dividends.
• Grandfather Clause: Those who applied before December 31, 2025, could lock in the current 0% tax rate for these income types.
• Extension Through 2055: The program has officially been extended to 2055, giving investors long-term stability for financial planning.

Benefits, Tax Incentives, and Savings

Here’s a breakdown of the current benefits and savings available through Act 60.

For Individual Investors

• Capital Gains Exemption: Capital gains realized after becoming a resident are taxed at 0%, as long as you apply before the new 4% rate begins on January 1, 2026.
• Dividends and Interest Exclusion: Qualifying individuals can receive an exemption from Puerto Rico income taxes on dividends and interest income.
• Federal Tax Break: Under IRC Section 933, Puerto Rico-sourced income is excluded from U.S. federal income tax if you meet the residency requirements.

For Businesses

• Dividend Distributions: Dividends paid out by eligible businesses are exempt from Puerto Rico income tax.
• Business Income Tax Rate: Companies engaged in qualified activities are taxed at a flat 4% rate on net income.
• Property Tax Relief: 75% exemption on property used in the business.
• Municipal Tax Reduction: Qualified businesses benefit from a 50% break on municipal taxes.
• R&D Incentives: Eligible research and development expenses may qualify for tax credits of up to 50%.

Industries That Qualify

Another great incentive is that Act 60 supports a wide range of industries, including export services, IT, manufacturing, finance, insurance, green energy, and more. Regardless of the field you’re in, there’s a chance you’ll find a qualifying opportunity.

Compliance Overview

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Many of the Act 60 requirements remain in place, especially for those seeking or maintaining eligibility. These include key residency and compliance rules that haven’t changed:

• Physical Presence: You must spend a minimum of 183 days per year in Puerto Rico.
• Primary Tax Home: Your main tax residence must be in Puerto Rico.
• Closer Connection Test: You need to show stronger personal and financial ties to Puerto Rico than to any other location.

Other ongoing requirements include:

• Annual Charitable Donation: Individual resident investors must donate $10,000 to approved Puerto Rico-based nonprofits.
• Business Audits: Companies operating under Act 60 may be subject to audits to detect any compliance issues.

New Compliance Updates

• Stricter Reporting Requirements: Beneficiaries must now submit more detailed annual reports and certifications.
• Minimum Investment Rule: There’s now a required minimum investment into Puerto Rico’s economy for continued eligibility.

Is Act 60 Right for You?

Even with the 4% tax rate for new applicants, Act 60 remains a strong option for high-income individuals looking for tax advantages and open to relocating to Puerto Rico. If you’re interested and have questions, book a free call with one of our professionals. We’re here to help guide you through the process.