Thousands of Americans have quietly relocated to Puerto Rico over the past decade, not just for the weather, but for one of the most powerful tax incentives available to U.S. citizens anywhere in the world. That program just went through its most significant overhaul since it was created. Here is what it is, where it came from, and what it looks like today.
Have questions about Act 60? Contact Frost Law.
Act 60, officially the Puerto Rico Incentives Code, enacted July 1, 2019, is a comprehensive tax incentive program designed to attract individuals, entrepreneurs, and businesses to Puerto Rico by offering tax benefits that exist nowhere else in the United States.
Its foundation rests on a legal quirk unique to Puerto Rico's status as a U.S. territory: under federal law, bona fide residents of Puerto Rico are generally exempt from U.S. federal income tax on income sourced from Puerto Rico. That means a U.S. citizen who genuinely moves to the island and earns investment income there can legally owe nothing to the IRS on that income, while keeping their U.S. citizenship and passport.
Act 60 builds on top of that federal exemption by also eliminating Puerto Rico's own taxes on that same income. The result, for qualifying individuals, is a total tax rate that can be as low as 0% on capital gains, interest, and dividends, and a flat 4% corporate tax rate for qualifying businesses that export services from the island.
To understand Act 60, you have to go back to its predecessor.
In January 2012, with Puerto Rico in the grip of a severe economic crisis, the Puerto Rico Legislature passed Act No. 22, formally titled the "Act to Promote the Relocation of Individual Investors to Puerto Rico." Its Statement of Purpose was direct: Puerto Rico needed to attract foreign capital, and it was willing to offer full tax exemption on investment income to individuals willing to genuinely relocate to the island.
Under Act 22, a qualifying Resident Individual Investor received:
To qualify, an investor had to become a bona fide Puerto Rico resident, meaning genuine domicile on the island, with 183 days of physical presence per year establishing a presumption of residency, and not have been a Puerto Rico resident during the six-year period before Act 22 took effect. Decrees were issued as legal contracts between the investor and the Commonwealth of Puerto Rico, valid through December 31, 2035.
The program worked. Investors relocated. Capital flowed in. Real estate markets moved. And Puerto Rico gained a new class of high-income residents.
By 2019, Puerto Rico had accumulated dozens of overlapping incentive laws, Act 20 for export services businesses, Act 22 for individual investors, and many others. On July 1, 2019, the Puerto Rico Legislature consolidated them all into a single unified statute: Act No. 60-2019, the Puerto Rico Incentives Code.
For individual investors, the core deal carried over from Act 22, 0% Puerto Rico tax on qualifying investment income, but with meaningful new requirements:
Existing Act 22 decree holders were brought into the Act 60 framework while retaining their original 0% tax benefits through 2035.
On March 10, 2026, Governor Jenniffer González-Colón signed Act No. 38-2026 into law, amending several provisions of the Puerto Rico Incentives Code. The changes are significant, but they draw a sharp line between existing participants and new applicants.
Act 38-2026 creates two distinct regimes based entirely on when an application is filed:
Track 1: Applications filed on or before December 31, 2026: All applications received by the OIN no later than 11:59 p.m. on December 31, 2026, per the Incentives Portal timestamp, are processed under the original rules. That means:
Track 2: Applications filed on or after January 1, 2027:
The program, previously set to expire in 2035, has been extended by 20 years, through December 31, 2055. This is the single most structurally significant change for long-term planning. Investors, families, and businesses can now plan around Act 60 benefits across generational timescales rather than a 10-year window.
Existing decree holders who want to access the 2055 extension may request a modification of their decree, but doing so triggers the 4% rate as of January 1 of the year the extension request is filed. That trade-off requires careful analysis.
The prior residency rule has been updated and it differs depending on when you apply:
For applications filed on or after January 1, 2027, compliance with the residential property requirement must now be demonstrated through evidence of full title and domain, duly registered (or pending registration) with the Puerto Rico Property Registry, held in the name of the individual, jointly with a spouse, or through a qualifying grantor trust under Section 2022.07. The prior option of holding property through a broader Puerto Rico legal entity is no longer available for new applicants.
The OIN's Bulletin also formally confirmed that applicants must submit a criminal record report from their last place of residence, and that convictions for felonies involving wire fraud, bank fraud, securities fraud, tax fraud, mail fraud, or similar financial crimes, or a pattern of criminal behavior, even across misdemeanors, are grounds for denial of a decree application.
Even with these reforms, the fundamentals of Act 60 remain intact:
Act 60 did not end. It evolved. The 0% era for new applicants is closing, replaced by a 4% rate that, by any global comparison, remains extraordinary for U.S. citizens. Federal capital gains taxes alone can reach 23.8% for high earners on the mainland, on top of state taxes. Puerto Rico at 4%, with no federal tax on Puerto Rico-sourced income, is still in a different category entirely.
What changed most is the framework around accountability: tighter documentation, stricter residency verification, more community investment through higher charitable contributions, and a program that now extends far enough into the future to support serious long-term planning.
For anyone hearing about Act 60 for the first time or wondering whether the recent changes affect an existing decree, the rules are more detailed and the stakes of getting them wrong are higher than ever. If you have questions about Act 60, please contact Frost Law at (410) 497-5947 or fill out our contact form.
Thousands of Americans have quietly relocated to Puerto Rico over the past decade, not just for the weather, but for one of the most powerful tax incentives available to U.S. citizens anywhere in the world. That program just went through its most significant overhaul since it was created. Here is what it is, where it came from, and what it looks like today.
Have questions about Act 60? Contact Frost Law.
Act 60, officially the Puerto Rico Incentives Code, enacted July 1, 2019, is a comprehensive tax incentive program designed to attract individuals, entrepreneurs, and businesses to Puerto Rico by offering tax benefits that exist nowhere else in the United States.
Its foundation rests on a legal quirk unique to Puerto Rico's status as a U.S. territory: under federal law, bona fide residents of Puerto Rico are generally exempt from U.S. federal income tax on income sourced from Puerto Rico. That means a U.S. citizen who genuinely moves to the island and earns investment income there can legally owe nothing to the IRS on that income, while keeping their U.S. citizenship and passport.
Act 60 builds on top of that federal exemption by also eliminating Puerto Rico's own taxes on that same income. The result, for qualifying individuals, is a total tax rate that can be as low as 0% on capital gains, interest, and dividends, and a flat 4% corporate tax rate for qualifying businesses that export services from the island.
To understand Act 60, you have to go back to its predecessor.
In January 2012, with Puerto Rico in the grip of a severe economic crisis, the Puerto Rico Legislature passed Act No. 22, formally titled the "Act to Promote the Relocation of Individual Investors to Puerto Rico." Its Statement of Purpose was direct: Puerto Rico needed to attract foreign capital, and it was willing to offer full tax exemption on investment income to individuals willing to genuinely relocate to the island.
Under Act 22, a qualifying Resident Individual Investor received:
To qualify, an investor had to become a bona fide Puerto Rico resident, meaning genuine domicile on the island, with 183 days of physical presence per year establishing a presumption of residency, and not have been a Puerto Rico resident during the six-year period before Act 22 took effect. Decrees were issued as legal contracts between the investor and the Commonwealth of Puerto Rico, valid through December 31, 2035.
The program worked. Investors relocated. Capital flowed in. Real estate markets moved. And Puerto Rico gained a new class of high-income residents.
By 2019, Puerto Rico had accumulated dozens of overlapping incentive laws, Act 20 for export services businesses, Act 22 for individual investors, and many others. On July 1, 2019, the Puerto Rico Legislature consolidated them all into a single unified statute: Act No. 60-2019, the Puerto Rico Incentives Code.
For individual investors, the core deal carried over from Act 22, 0% Puerto Rico tax on qualifying investment income, but with meaningful new requirements:
Existing Act 22 decree holders were brought into the Act 60 framework while retaining their original 0% tax benefits through 2035.
On March 10, 2026, Governor Jenniffer González-Colón signed Act No. 38-2026 into law, amending several provisions of the Puerto Rico Incentives Code. The changes are significant, but they draw a sharp line between existing participants and new applicants.
Act 38-2026 creates two distinct regimes based entirely on when an application is filed:
Track 1: Applications filed on or before December 31, 2026: All applications received by the OIN no later than 11:59 p.m. on December 31, 2026, per the Incentives Portal timestamp, are processed under the original rules. That means:
Track 2: Applications filed on or after January 1, 2027:
The program, previously set to expire in 2035, has been extended by 20 years, through December 31, 2055. This is the single most structurally significant change for long-term planning. Investors, families, and businesses can now plan around Act 60 benefits across generational timescales rather than a 10-year window.
Existing decree holders who want to access the 2055 extension may request a modification of their decree, but doing so triggers the 4% rate as of January 1 of the year the extension request is filed. That trade-off requires careful analysis.
The prior residency rule has been updated and it differs depending on when you apply:
For applications filed on or after January 1, 2027, compliance with the residential property requirement must now be demonstrated through evidence of full title and domain, duly registered (or pending registration) with the Puerto Rico Property Registry, held in the name of the individual, jointly with a spouse, or through a qualifying grantor trust under Section 2022.07. The prior option of holding property through a broader Puerto Rico legal entity is no longer available for new applicants.
The OIN's Bulletin also formally confirmed that applicants must submit a criminal record report from their last place of residence, and that convictions for felonies involving wire fraud, bank fraud, securities fraud, tax fraud, mail fraud, or similar financial crimes, or a pattern of criminal behavior, even across misdemeanors, are grounds for denial of a decree application.
Even with these reforms, the fundamentals of Act 60 remain intact:
Act 60 did not end. It evolved. The 0% era for new applicants is closing, replaced by a 4% rate that, by any global comparison, remains extraordinary for U.S. citizens. Federal capital gains taxes alone can reach 23.8% for high earners on the mainland, on top of state taxes. Puerto Rico at 4%, with no federal tax on Puerto Rico-sourced income, is still in a different category entirely.
What changed most is the framework around accountability: tighter documentation, stricter residency verification, more community investment through higher charitable contributions, and a program that now extends far enough into the future to support serious long-term planning.
For anyone hearing about Act 60 for the first time or wondering whether the recent changes affect an existing decree, the rules are more detailed and the stakes of getting them wrong are higher than ever. If you have questions about Act 60, please contact Frost Law at (410) 497-5947 or fill out our contact form.
