Puerto Rico Act 60 Explained

Looking for a tropical tax haven? Read our Puerto Rico Act 60 explained guide to see why moving to the island makes a lot of financial sense.

If you’re a remote worker, digital nomad, or entrepreneur looking for a relaxed and idyllic lifestyle that allows you to keep more of your hard-earned money, you might already know that Puerto Rico is a major tax haven for many. What could be better than living in paradise and lowering your tax bill significantly at the same time?

There are other tax havens in the beautiful Caribbean, so what makes Puerto Rico so special? To start, Puerto Rico is a U.S. territory, so it does not require a passport for US citizens. It also does not require you to expatriate, or give up your US citizenship in order to gain the tax benefits of Act 60, formerly known as Acts 20 and 22.

Act 60 Puerto Rico Summary

~ Puerto Rico Act 60 Tax Incentives and Act 60 Puerto Rico Requirements ~

So what does Act 60 do exactly, and what are the benefits and requirements? In a nutshell, Act 60 was designed to foster the development of Puerto Rico through private investments from outside sources. By offering major tax breaks, the island can attract wealthy investors and businesses.

To be eligible for the tax breaks, you must be a resident of Puerto Rico. To be clear, this does not mean owning a second home here and visiting once or twice a year. US citizens must become bona-fide residents, which means you need to pass a few tests:

The Presence Test

You must live on the island for at least 183 days during the taxable year.

The Tax Home Test

You must not own a “tax home” (general place of business) outside of Puerto Rico at any point during the taxable year.

The Closer Connection Test

A somewhat subjective test, the IRS considers whether you have closer connections to the U.S. than to Puerto Rico.

It should also be noted that to be a bona-fide resident, you are expected to purchase real estate property within two years of obtaining your tax exemption agreement.

As far as benefits of Act 60, they can be broken down into those gained by businesses and those by resident individual investors.

Businesses who qualify will only be responsible for paying a 4% corporate tax while individual investors will pay 0% capital gains tax. Yes, you read that right. This is why so many investors, particularly cryptocurrency investors in the last five years, have been moving down to the island.

If you have any questions about Act 60, please don’t hesitate to give my office a call. And if you’re ready to start searching for your new island home or condo, start by looking through my inventory.

I look forward to helping you move to paradise and save more money!