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. 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.

Watch — the whole program in 3 minutes

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 (Chapter 3 guide).

This guide covers the Chapter 2 individual investor decree — the same program older articles call Act 22 (full mapping).

The mechanism 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 decree suits people relocating to Puerto Rico who expect meaningful investment income after the move — founders and early employees ahead of an exit, active traders and crypto investors, retirees and families with large taxable portfolios (see how retirement accounts are treated).

W-2 salary and mainland-source business income are not covered (what W-2 and remote workers get; a business may separately qualify under Chapter 3), and the residency obligations are real — with evidence to prove them, every year. For an honest look at the trade-offs, see who should not apply. The eligibility gate is prior residency: you cannot have been a bona fide resident of Puerto Rico during the statutory lookback period before applying (full requirements).

What Are the Tax Benefits?

Two traps: 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 — and only Puerto Rico–source income qualifies, on technical sourcing rules. Worked examples: tax benefits guide.

What Are the Requirements?

Three layers stack:

1. IRS bona fide residency — the three tests in IRS Publication 570: presence (most people use the 183-day rule), tax home, closer connection. Failing any one can unwind the federal exclusion regardless of the decree.
2. Decree conditions — residential property in Puerto Rico within 2 years of the decree (ticking from grant, not application), a $10,000 annual donation split $5,000/$5,000 across two required categories, and continued PR residency.
3. Annual compliance — a yearly DDEC report, a $5,000 annual fee, donation proof, plus residency logs and CPA verification letters under the updated portal requirements (annual requirements).

How Do You Apply?

Applications go through DDEC's incentives portal (incentives.ddec.pr.gov):

1. Confirm eligibility (lookback period, income profile).
2. Assemble the 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 → post-grant clocks start (home purchase, first annual obligations, Form 8898 with the federal return).

Full document checklist: application process.

How Much Does It Cost?

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 obligations above repeat annually for the decree term, alongside Puerto Rico tax returns with Hacienda and the evidence that supports the 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?

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 decree conditions were met (donations, filings, property); an IRS audit asks whether you were really a bona fide resident and the income really PR-source — won or lost on contemporaneous evidence: travel records, housing, banking, closer-connection facts (Act 60 audits).

Explore the full guide

• 2026 Changes→
• Tax Benefits→
• Crypto & Act 60→
• Retirement Accounts→
• Requirements→
• Who Should Not Apply→
• W-2 & Remote Workers→
• Application Process→
• Costs→
• Moving Checklist→
• 183-Day Rule→
• Bona Fide Residency→
• Annual Requirements→
• Audits→
• Common Mistakes→
• Leaving Act 60→
• Act 22 vs Act 60→
• Export Services (Ch. 3)→