Act 60, explained

What Act 60 actually is

Act 60 of 2019 — the Puerto Rico Incentives Code (Ley 60-2019) — is an omnibus law that consolidated dozens of older tax-incentive statutes into one framework. When people say "Act 60" they almost always mean the two programs it absorbed: Act 20 of 2012 (export services) and Act 22 of 2012 (individual investors).

• It's a decree system, not an automatic break: you apply to DDEC (Puerto Rico's Department of Economic Development and Commerce), and if approved you sign a decree — a contract with the government that carries obligations and can be audited or revoked.
• The incentives only work because of Puerto Rico's unusual federal tax status: under IRC §933, income sourced in Puerto Rico is generally excluded from U.S. federal tax for bona fide residents — PR sets its own rates on that income.This is why the same structure is impossible in any U.S. state.
• Terms are amended periodically — donation amounts, fees, and program availability have all changed since 2019. Anything you read (including this page) is a snapshot; DDEC's current rules govern.

Sources: DDEC — Puerto Rico incentives · IRS — Puerto Rico income exclusion (§933 context, Pub 570)

The two decrees people mean

• Export Services (the old Act 20): a roughly 4% Puerto Rico corporate income-tax rate on qualifying income from services performed in PR for clients OUTSIDE PR — consulting, software, marketing, back-office and similar.The work has to genuinely happen in Puerto Rico, for non-PR clients.
• Individual Resident Investor (the old Act 22): 0% Puerto Rico tax on capital gains, interest, and dividends that accrue AFTER you become a bona fide resident of Puerto Rico.
• The classic misunderstanding, stated plainly: gains your assets built up BEFORE you moved are not wiped out. Pre-residency appreciation generally remains taxable under U.S. federal rules when you sell; the decree covers what accrues after the move.This single point is where a large share of Act 60 disappointment (and IRS attention) comes from.
• Neither decree removes U.S. federal obligations that fall outside §933 — U.S.-source income, most retirement account rules, and self-employment taxes have their own treatment. This is exactly the terrain where professional advice is non-optional.

Sources: DDEC — incentives portal · IRS Publication 570

Eligibility — the walkthrough

The decree is the easy half. The hard half is bona fide residency, which is defined by the IRS, not by Puerto Rico — and you must pass ALL THREE tests, every year. Failing any one generally keeps you taxable on worldwide income as a regular U.S. taxpayer.

• 1 · The presence test — most commonly satisfied by spending 183+ days in Puerto Rico during the tax year.Pub 570 lists alternative ways to satisfy presence, but 183 days is the one most people rely on. Day counts get audited; keep records.
• 2 · The tax-home test — your main place of business or employment must be in Puerto Rico. Working remotely FOR yourself from PR usually qualifies; keeping your real economic base on the mainland usually doesn't.
• 3 · The closer-connection test — your life has to actually point at Puerto Rico: home, family, driver's license, voter registration, bank accounts, doctors. A mainland house you 'visit' every weekend is how people fail this one.
• Moving year: if your worldwide income exceeds $75,000 that year, you must file IRS Form 8898 announcing the residency change — and the year is split, with the decree's benefits only applying to the post-residency portion.
• Then the decree itself: application through DDEC's portal with filing and acceptance fees (they run to several thousand dollars — current schedule on DDEC's site).

Sources: IRS Publication 570 — the three tests · IRS — Form 8898 (moving to/from a U.S. territory) · DDEC — application portal

The obligations — a decree is a contract

Individual Resident Investor decrees in particular carry standing obligations. These are enforced: DDEC audits decree holders, and non-compliance can void the decree retroactively.

• Buy a home in Puerto Rico within two years of the decree, and keep it as your primary residence.
• Donate annually to qualifying Puerto Rican nonprofits — $10,000 per year under the 2020 amendments, split between organizations per DDEC's rules (one from the approved child-poverty list). Confirm the current amount with DDEC.
• File an annual compliance report with DDEC, with a filing fee that runs into the thousands of dollars under current rules.
• Maintain bona fide residency continuously — the three IRS tests are annual, not one-time.
• Keep everything documented: travel records, the donation receipts, the home purchase. In an audit — DDEC's or the IRS's — the burden is effectively yours.

Sources: DDEC — decree obligations & annual reports

The honest part — scrutiny and controversy

No other English-language explainer will tell you this part properly, so here it is. Act 60 is simultaneously a real, legal incentive program and one of the most scrutinized tax arrangements in the United States — and on the island it is genuinely controversial.

• The IRS runs an active compliance campaign on Act 22/60 individual decree holders, focused on people who claimed the benefits without truly meeting the residency tests — including criminal referrals in the most aggressive cases.787daily has covered this directly — see the enforcement stories below.
• A GAO review signaled continued and intensifying federal attention on how the program is used and policed.
• On the island, critics tie decree-holder migration to rising housing costs and displacement in coastal towns — Rincón, Dorado, parts of San Juan — while supporters point to investment, jobs, and the donation pipeline. Both things can be true; the debate is live in PR politics and it shapes how the program keeps getting amended.
• Practical takeaway: structure everything as if you will be audited, because statistically, decree holders increasingly are.

Sources: 787daily — IRS takes a hard look at PR tax breaks · 787daily — GAO signals intensified IRS scrutiny · 787daily — PR steps up Act 60 compliance enforcement

Is it for you? Next steps

Act 60 genuinely fits some situations — a location-independent business with mainland clients, or a portfolio whose FUTURE growth you'd rather realize as a Puerto Rico resident — and fits badly when the move itself isn't real. The program rewards people who actually live here.

• If your income is mostly W-2 wages from a mainland employer, the decrees likely do far less than the marketing implies — the residency tests and sourcing rules still apply to you.
• Hire a Puerto Rico-licensed CPA or tax attorney BEFORE you move, not after. The sequencing of the move, the decree, and asset sales is where the value (and the risk) lives.787daily has no affiliation with any advisor; this is process advice, not a referral.
• Read the primary sources yourself — Pub 570 is dense but readable, and DDEC's portal has the actual current fees and terms.
• And live here like you mean it: the program, the IRS tests, and frankly the island all work better when the move is real.

Sources: DDEC — start an application · IRS Publication 570 · 787daily — the practical moving guide

Latest Act 60 news