Puerto Rico Act 60: The Complete Guide (Updated for 2026)

Act 60 is Puerto Rico's Incentives Code — the law that lets qualifying new residents pay 0% tax on Puerto Rico–source capital gains, dividends, and interest (4% for decrees granted on applications filed after December 31, 2026). In exchange, you must become a bona fide resident of Puerto Rico, buy a home, make annual charitable donations, and file yearly compliance reports for the life of a 15-year decree. This guide covers the entire lifecycle: eligibility, the application, costs, the 183-day rule, annual obligations, and what happens when DDEC or the IRS audits.

What Is Act 60?

Act 60-2019, the Puerto Rico Incentives Code, consolidated dozens of older incentive laws into a single statute effective January 1, 2020. The two programs most people mean when they say "Act 60" are:

• Individual Resident Investor (Act 60 Chapter 2, formerly Act 22): personal tax exemptions on investment income for new bona fide residents.
• Export Services (Act 60 Chapter 3, formerly Act 20): a 4% corporate rate for businesses exporting services from Puerto Rico.

This guide focuses on the individual investor decree — the Chapter 2 program. If you still see "Act 22" in forums and older articles, it's the same program under its pre-2020 name; see Act 22 vs. Act 60 for the full mapping.

The mechanism that makes it work is federal, not just local: under IRC §933, bona fide residents of Puerto Rico exclude Puerto Rico–source income from U.S. federal tax. Act 60 then reduces or eliminates the Puerto Rico tax on that same income. Residency is therefore the load-bearing requirement — the decree is only as good as your ability to prove you actually live in Puerto Rico.

Who Is Act 60 For?

The individual investor decree is designed for people relocating to Puerto Rico who expect meaningful investment income after the move — capital gains, dividends, and interest. Typical profiles: founders and early employees ahead of an exit, active traders and crypto investors, and retirees or families with large taxable portfolios.

It is not automatically a fit for everyone with a high income. W-2 salary and mainland-source business income are not covered by the individual decree (a business may separately qualify under Chapter 3). And the residency obligations are real: roughly half the year physically in Puerto Rico, every year, with evidence to prove it. Anyone unwilling to genuinely relocate should not apply.

Basic eligibility gate: you cannot have been a bona fide resident of Puerto Rico during the statutory lookback period before applying — see full requirements.

What Are the Tax Benefits?

For a decree holder who establishes bona fide residency, Act 60 Chapter 2 provides:

Two things trip people up. First, pre-move appreciation is not exempt — securities gains that built up before you became a resident keep U.S. tax exposure if realized within ten years of the move. Second, only Puerto Rico–source income qualifies, and sourcing rules are technical. The tax benefits guide walks through worked examples.

What Are the Requirements?

Three layers of requirements stack on top of each other:

1. IRS bona fide residency — the three tests in IRS Publication 570: the presence test (most people use the 183-day rule), the tax home test, and the closer connection test. Failing any one of them can unwind the federal exclusion regardless of what your decree says.
2. Decree conditions — purchase a residential property in Puerto Rico within 2 years of the decree (it starts ticking at grant, not at application), make a $10,000 annual donation to qualified Puerto Rico nonprofits (split $5,000/$5,000 across two required categories), and maintain PR residency for the decree term.
3. Annual compliance — a yearly report to DDEC, a $5,000 annual fee, donation proof, and — under the updated DDEC portal requirements — residency logs and CPA verification letters. Full breakdown: annual requirements.

How Do You Apply?

Applications go through DDEC's incentives portal (incentives.ddec.pr.gov). The high-level sequence:

1. Confirm eligibility (lookback period, income profile).
2. Assemble the document package — IDs, address history, sworn statements, criminal background check, financial declarations.
3. File through the portal and pay filing fees.
4. DDEC review: typically 60–120 days, sometimes with information requests.
5. Decree granted → acceptance and post-grant clocks start (home purchase, first annual obligations, Form 8898 with your federal return).

Step-by-step with the full document checklist: application process.

How Much Does It Cost?

Plan for three buckets — one-time government/filing costs, professional fees, and recurring annual costs:

A realistic all-in first-year budget, excluding the home itself, lands in the $20,000–$30,000 range. Line-by-line detail: Act 60 costs.

What Are the Ongoing Obligations?

The decree is a 15-year relationship with the government of Puerto Rico, not a one-time filing. Every year you must: file the DDEC annual report, pay the $5,000 fee, complete and document the $10,000 donation before December 31, file Puerto Rico tax returns with Hacienda, and maintain the evidence that supports your residency position. Since 2026, late annual filings draw automatic $1,000 fines, and continued non-compliance escalates toward decree revocation. See annual requirements and the common mistakes that actually get decrees revoked.

What Happens If You Get Audited?

Enforcement is no longer theoretical. In 2025, DDEC's Office of Incentives audited roughly 1,800 decrees, issuing 305 deficiency notices, 19 annulments, and 4 revocations. In parallel, the IRS runs an active campaign examining Act 60/Act 22 residency and income-sourcing claims.

A DDEC audit asks whether you met decree conditions (donations, filings, property). An IRS audit asks whether you were really a bona fide resident and whether income was really PR-source — and it is won or lost on contemporaneous evidence: travel records, housing, banking, and the closer-connection facts of your life. What each audit looks like and how holders respond: Act 60 audits.

Explore the full guide

• 2026 Changes→
• Tax Benefits→
• Requirements→
• Application Process→
• Costs→
• Moving Checklist→
• 183-Day Rule→
• Bona Fide Residency→
• Annual Requirements→
• Audits→
• Common Mistakes→
• Act 22 vs Act 60→