Quick answer: Puerto Rico Act 60 lets bona fide residents of the island pay a 4% flat rate on qualifying service income and 0% on Puerto Rico-source capital gains, dividends, and interest — instead of US federal rates up to 37%. You keep your US citizenship, passport, Medicare, and Social Security. The program runs through 2055, but the 0% capital-gains tier for new applicants ends December 31, 2026 — after that, new decrees get 4% on gains.
This guide covers everything: how the law works, who actually qualifies, what it costs, the filing timeline, and the mistakes that get decrees denied. It's written by advisors who do this all day — no hype, no offshore-bro nonsense.
What is Act 60?
Act 60 is Puerto Rico's Incentives Code, passed in 2019. It consolidated the island's tax incentive programs — including the old Acts 20 and 22 that built the crypto and founder wave of the 2010s — into a single framework with two chapters that matter to individuals:
- Chapter 2 — Individual Resident Investors. Bona fide PR residents pay 0% tax on Puerto Rico-source capital gains, dividends, and interest. Gains accrued before you move remain US-taxed, but after 10 years of residency even pre-move gains become PR-source.
- Chapter 3 — Export Services. Businesses providing services from PR to clients elsewhere pay a 4% corporate rate instead of the 21%+ federal rate — plus PR's standard 0-4% owner distribution treatment.
The legal foundation is IRC Section 933: bona fide residents of Puerto Rico are excluded from US federal income tax on PR-source income. That's US tax law, not a loophole — it has existed since 1954. Act 60 is the Puerto Rican law that makes staying on the island attractive instead of merely possible.
Key pointAct 60 is a contract. Once granted, your decree is a binding agreement with the government of Puerto Rico that cannot be revoked unilaterally — even if the law changes. Existing decree holders keep their terms for the full 15-year period, renewable for 15 more.
The rates: what you actually pay
Here's the comparison that matters. A consultant earning $1M a year, incorporated, living in California versus operating under an Act 60 Chapter 3 decree:
| California | Puerto Rico (Act 60) | |
|---|---|---|
| Federal corporate + individual | ~37% top marginal | 0% federal (Sec. 933) |
| State/corporate rate | 13.3% top marginal | 4% fixed (decree rate) |
| Capital gains | Up to 20% + 3.8% NIIT + state | 0% on PR-source gains |
| Dividends & interest | Up to 37% | 0% PR-source |
The mechanics differ by chapter. Chapter 3 (export services) income flows through your PR entity at the 4% decree rate. Chapter 2 (investor) treatment applies to your personal investment income once you're a bona fide resident. Most clients use both: a Chapter 3 entity for the business, Chapter 2 status for investments.
The 2026 deadline — the part everyone gets wrong
Here's what changed and what didn't. The overall Act 60 program runs through 2055. But for applications filed after December 31, 2026, the 0% capital-gains rate drops to 4% for new individual investors.
- Filed on or before Dec 31, 2026: 0% on PR-source capital gains, grandfathered for the life of your decree.
- Filed after: 4% on gains. Still dramatically better than mainland rates — but 0% is gone.
Two details people miss:
- The filing date matters, not the approval date. Applications are date-stamped when submitted to the DEDC (the economic development agency). Approval can take months. File in November, get approved in March, keep your 0%.
- You must already be a bona fide resident when you apply — which means the real deadline for moving is earlier than the filing deadline. Relocating in Q4 2026 and filing on time is tight but doable; starting the move in December is not.
Don't sprint into thisThe deadline creates urgency, but a rushed residency record is the #1 reason decrees get audited and denied. Work backwards from Dec 31: entity formed, residence established, days counted, application filed — with margin.
Who qualifies (and who shouldn't bother)
Eligibility comes down to bona fide residency — where the IRS and PR's tax authority agree you actually live. The full requirements checklist is here; the short version:
- 183+ days per year in Puerto Rico, and no other tax home. Day counting is strict: presence any part of a day usually counts, travel days included.
- A property purchase within 2 years for Chapter 2 individual investors — a real residence, not a token condo.
- Annual charitable donation to PR-registered nonprofits — $10,000/year for Chapter 2 (first-year $5,000 is common in practice).
- No more than 90 days in the US mainland per year (some exceptions for business, with documentation).
- Clean filing history — you must be current on all US tax filings, including any final state returns you'll file when abandoning your old domicile.
Who this works for: founders, consultants, remote executives, traders, and investors with high service or investment income who genuinely want to live on the island. Who it doesn't: anyone planning to "sort of" move. If your family, business, and life stay on the mainland and you rent a PR apartment for the paperwork, you're building an audit file, not a tax strategy.
Crypto: the move-before-you-sell rule
Crypto is where Act 60's biggest numbers live — and where the biggest mistakes happen. The rule is simple: capital gains are taxed based on where you're resident when you realize them. Move first. Sell second.
If you're sitting on large unrealized crypto gains and you sell while still a California resident, you owe US federal + state on everything. Become a bona fide PR resident first, and post-move appreciation is 0% under Chapter 2. We cover the mechanics — including the 10-year rule for pre-move gains and the records the IRS expects — in the dedicated crypto guide.
What it costs, all-in
The tax benefits are real; so are the costs. Budget honestly:
| Item | Cost |
|---|---|
| Advisory & application | $4,995 (our flat fee — see pricing) |
| Government fees | ~$5,000 application + ~$5,000/year |
| Legal & CPA | $5,000–15,000 depending on complexity |
| Charitable donation | $10,000/year (Chapter 2) |
| Property purchase | Required within 2 years — market-priced |
Run the numbers against your income: at $500K of service income, the annual tax delta alone typically clears $150K. Most clients recover the entire setup cost in the first month of the decree. The savings calculator on our home page does this math for your state and income.
The timeline, start to decree
- Weeks 1–2 — Strategy. Income analysis, entity design, eligibility check. You leave with a savings number and a go/no-go.
- Weeks 3–6 — Setup. PR entity formation, EIN, bank accounts, lease or purchase planning. You should be on the island settling in.
- Weeks 6–10 — Filing. DEDC application compiled and submitted. Date-stamp is everything (see the deadline section).
- Months 3–9 — Approval. Decree issued. Your 4%/0% rates apply from your residency start date, not approval.
- Ongoing — Compliance. Annual reports, day-count records, donation receipts. The decree is a contract; compliance keeps it enforced.
The five mistakes that sink applications
- Applying before actually moving. Bona fide residency is tested first. Establish the home, the days, the life — then file.
- Selling appreciated assets before the move. See crypto above. This one mistake can cost seven figures.
- Sloppy day counts. Keep boarding passes, ferry tickets, toll records. The burden of proof is yours.
- Forgetting the old state. California and New York aggressively audit departing residents. Your exit from the old domicile needs its own documentation.
- Buying a token property. The 2-year purchase requirement is a residency signal, not a checkbox. Inspectors and auditors can tell.
Next steps
If the numbers work, the move is worth it — and the 2026 deadline makes "eventually" a decision you're making right now. Start with the two things that don't cost anything: run your numbers in the savings calculator, then take the free 30-minute assessment. We'll tell you straight whether Act 60 fits your situation — including when it doesn't.