A plain-English orientation to Act 60, source-of-income questions and federal bona fide residency. This guide distills the most relevant resident-written FAQs and links back to source notes for consequential details.
What is Act 60?
Act 60 of 2019 — the Puerto Rico Incentives Code — consolidated earlier programs (most famously Acts 20 and 22) into one framework. The two parts most relevant to relocating individuals are the Individual Resident Investor incentive (Chapter 2, the former Act 22) and the Export Services incentive (Chapter 3, the former Act 20). It works by interacting with U.S. federal law: as a bona fide Puerto Rico resident, your PR-sourced income is generally excluded from U.S. federal tax under Section 933, while Puerto Rico applies its own incentivized treatment. This is general information, not tax advice — confirm specifics with Puerto Rico tax counsel.
What tax benefit does the Individual Resident Investor incentive offer?
Historically it offered a 0% Puerto Rico rate on qualifying Puerto Rico–sourced passive income — interest, dividends, and capital gains realized after you become a resident — for holders of a valid decree. As of the 2025–2026 reform, new applicants face a 4% rate instead (see the questions on the 2026 changes). Always model your own situation with a PR CPA.
What changed with Act 60 in 2025–2026?
Puerto Rico amended the Individual Resident Investor incentive, so there are now effectively two versions of the law: the one governing people who got in early, and the one governing new arrivals. Existing decree holders keep their benefits. Applications submitted on or before December 31, 2026 retain the legacy 0% structure; applications on or after January 1, 2027 carry a 4% preferential rate with the program horizon extended to 2055. These provisions remain subject to implementing guidance — confirm every figure with Puerto Rico tax counsel.
What is the Act 60 grandfathering deadline?
Investor decree applications submitted on or before December 31, 2026 retain the legacy 0% rate structure, which runs through 2035 under current terms. Because the application submission date — not your move date or approval date — generally controls your status, and decrees can take many months to process, this is a planning conversation to have with counsel now, not later.
What is the new Act 60 rate after January 1, 2027?
Applications submitted on or after January 1, 2027 are subject to a 4% preferential rate on qualifying passive income. In exchange, the program's horizon was extended to 2055, giving newer entrants two decades of locked-in certainty. For a U.S. citizen who would otherwise face combined rates north of 30%, a 4% rate remains one of the most powerful legal tax positions available anywhere without renouncing citizenship.
If I already hold an Act 60 decree, am I protected?
Yes. Existing decree holders are grandfathered — your benefits are protected. You may also elect to swap into the new framework to extend your horizon to 2055. Coordinate any such election with your Puerto Rico CPA and attorney.
Is there a new prior-residency requirement under Act 60?
Yes. Post-reform applicants must generally demonstrate they were not Puerto Rico residents for roughly six years before relocating. The incentive is now aimed squarely at genuine new arrivals. Verify whether this affects your eligibility with Puerto Rico tax counsel.
Does my move date or my application date lock in my Act 60 status?
Generally the application submission date controls your status — not your move date and not your approval date. Since decrees can take many months to process, if the grandfathering window matters to your math you should be talking to counsel today rather than next spring.
What is the Export Services incentive under Act 60?
For businesses that export services from Puerto Rico, Chapter 3 offers a flat 4% corporate tax rate on qualifying income, generally a 100% exemption on distributions of that income, and property- and municipal-tax exemptions (commonly cited up to 75% on property tax). Notably, the 2025–2026 individual-investor reform did not change this export-services framework. Whether your business qualifies — and how to structure it with real substance (office, employees, genuine activity) — requires analysis by a Puerto Rico CPA.
What are the bona fide residency requirements for Act 60?
Act 60 requires you to establish and maintain bona fide Puerto Rico residency in the eyes of the IRS — decided independently of your Puerto Rico decree, under Section 937. You must satisfy all three tests every year: the presence test, the tax home test, and the closer-connection test. A decree does not bind the IRS, which now runs an active enforcement campaign — the people who are fine are the ones who genuinely moved their lives here and kept records. This is the shape of the requirement, not legal advice.
What is the 183-day rule / the presence test?
The presence test is satisfied for the year if you meet any one of five conditions, the cleanest being that you were physically present in Puerto Rico for at least 183 days during the tax year. Other paths include being present at least 549 days across three years (with 60+ in each), spending no more than 90 days in the U.S., having U.S. earned income of $3,000 or less while present more in PR, or having no significant connection to the U.S. Most families plan around the 183-day standard and keep boarding passes as proof.
What are the tax home and closer-connection tests?
The tax home test requires your principal place of business or employment to be in Puerto Rico for the entire year, with no tax home outside it — this catches people who move their address but keep running their working life from the mainland. The closer-connection test requires that you not have a closer connection to the U.S. (or any country) than to Puerto Rico; the IRS weighs your home, family, belongings, banking, driver's license, voter registration, and professional and social ties. No single item decides it, but the whole picture must point to Puerto Rico.
What is IRS Form 8898?
In the year you establish (or end) Puerto Rico residency, you generally must file IRS Form 8898, and it is mandatory if your worldwide gross income that year is at or above $75,000. The mechanics are technical and matter enormously if you're timing the move around a specific gain — this is exactly what your CPA and attorney are for.
Is Act 60 something I can set up myself?
No — this is not a do-it-yourself project. You need a Puerto Rico–based Act 60 attorney and a Puerto Rico–based CPA who specialize in this work; your mainland CPA almost certainly cannot do it. The IRS runs an active enforcement campaign on these claims, so the families who are fine are the ones who actually moved their lives to the island and kept the records to prove it. Engage specialists before you finalize the home, the move date, or school deposits.
Is there a deadline to buy a home after getting an Act 60 decree?
Yes. The amended law requires new decree holders to acquire a Puerto Rico primary residence — a real home you genuinely live in, not a vacation property — within two years of obtaining the decree. It must be held individually, jointly with a spouse, or through a qualifying trust (no longer through an LLC), with title registered in the Puerto Rico Property Registry. Missing this deadline can put your decree at risk, so coordinate timing and ownership structure with your CPA and attorney from the start.
Do I have to get an Act 60 decree to live in Dorado?
No. Act 60 is a tax incentive, not a requirement to live here — plenty of Dorado residents don't hold a decree. You only pursue one if the tax benefits are a meaningful part of your plan. The lifestyle, the community, the schools, and the homes are open to anyone. As the authors put it, they didn't move for the tax benefits; they moved because they wanted to live somewhere that felt alive.
Next step
Use the complete FAQ for narrower questions, then speak with the accountable professional or institution before committing money or making a legal, tax, medical or membership decision.