Act 60 Export Services: One Law, Two Chapters — Which One Is Yours?
Act 60's export-services incentive is Chapter 3 of the Incentives Code: a 4% corporate rate for a business performing services in Puerto Rico for clients outside Puerto Rico. It is separate from the individual investor decree (Chapter 2), with different rates, different tests, and no December 31, 2026 deadline — that belongs to Chapter 2 only. Act 60 isn't one deal; it's two, and planning around the wrong chapter means planning around rules that don't apply to you. (The old Act 20 became Chapter 3, Act 22 became Chapter 2, at the 2020 consolidation — the name mapping covers that story.)
What is the difference between Chapter 2 and Chapter 3?
Chapter 2 is for you, the individual. Chapter 3 is for your business. The table below is the whole disambiguation:
| Rule | Chapter 2 — Resident Individual Investor | Chapter 3 — Export Services |
|---|---|---|
| Who holds the decree | You, the individual | Your business |
| Rate | 0% on covered PR-source capital gains, dividends, and interest for applications filed by Dec 31, 2026; 4% for applications filed after | 4% corporate rate on eligible export-services net income; 2% for the first 5 years for businesses under $3M in annual volume |
| Core test | Bona fide residency — presence, tax home, closer connection — met every year | Services performed in Puerto Rico for clients outside Puerto Rico, with no Puerto Rico nexus |
| Dividends | Covered PR-source dividends within the individual decree | 100% exempt from PR tax when paid from decree income to PR-resident owners |
| Employees | Not applicable | At least one full-time PR-resident employee once annual volume exceeds $3M — the owner can count |
| December 31, 2026 deadline | Yes — the deadline belongs to this chapter | No deadline — Act 38-2026 did not amend Chapter 3 |
| Decree term | 15-year contract | 15-year decree, renewable for 15 more |
What does Chapter 3 actually offer an export-services business?
The headline: a 4% corporate rate on eligible export-services net income, 2% for the first five years under $3 million in annual volume, dividends 100% exempt to Puerto Rico–resident owners, and a decree that runs 15 years, renewable for 15 more. Applications go through incentives.ddec.pr.gov.
What does Chapter 3 require?
Three structural requirements: the business performs services in Puerto Rico for clients outside Puerto Rico with no Puerto Rico nexus; above $3 million in annual volume it needs at least one full-time Puerto Rico–resident employee (the owner can count); and the owner takes a reasonable salary at ordinary Puerto Rico rates— the 4% applies to the business's net income, not the paycheck.
Does the December 31, 2026 deadline apply to export services?
No. The deadline that dominates 2026 coverage is a Chapter 2 deadline: individual applications filed after December 31, 2026 move from 0% to 4% under Act 38-2026 — which did not touch Chapter 3. Export-services terms carry no filing deadline (the 2026 changes).
What is the GILTI trap between the chapters?
The trap is wanting Chapter 3's rate without the move. If the owner does not genuinely relocate, U.S. anti-deferral rules — GILTI and the controlled-foreign-corporation regime — can reach the company's income on the owner's U.S. return. The exposure is conditional on the owner's facts, but the incentive's structure is clear: the dividend exemption runs to Puerto Rico–resident owners, and without the residency, the arrangement mostly relocates paperwork.
Which chapter do you need?
Living on investment income — Chapter 2, and the December deadline is yours. Running a service business that can operate from the island for mainland clients — Chapter 3: no deadline, but real presence, a real salary, and above $3 million a real employee. A W-2 employee fits neither directly, though the contractor-to-entity path leads to Chapter 3. The tests never merge: each decree is earned on its own terms, every year.
Frequently Asked Questions
- Is Act 20 the same as Act 60 Chapter 3?
- Yes — Act 20-2012 (Export Services) became Chapter 3 of Act 60 when the incentives were consolidated effective January 1, 2020. The name mapping guide covers both renames.
- Does the December 31, 2026 deadline apply to Chapter 3?
- No. Act 38-2026 amended the individual investor chapter (Chapter 2) only; Chapter 3's export-services terms carry no filing deadline.
- Can one person use both chapters?
- The chapters are separate decrees with separate applications and separate tests — an individual decree for personal investment income, a business decree for export-services income. Nothing merges; each is earned on its own terms, every year.
- Is the owner's salary taxed at 4%?
- No. Chapter 3 requires the owner to take a reasonable salary taxed at ordinary Puerto Rico rates. The 4% rate applies to the business's eligible export-services net income.