Puerto Rico’s Act 60, also known as the Puerto Rico Incentives Code, combines previous tax incentive acts, particularly Acts 20 and 22, to encourage economic growth by attracting high-net-worth individuals and businesses to Puerto Rico through tax benefits. The act is primarily targeted at U.S. citizens who want to reduce their U.S. tax burden without renouncing citizenship. Here’s a breakdown of the key aspects:

1. Tax Incentives for Individuals: Act 60 allows Resident Individual Investors who become bona fide residents of Puerto Rico to enjoy exemptions on certain types of income, such as interest and dividends. Additionally, capital gains on assets acquired after becoming a resident are tax-exempt in Puerto Rico. Gains from assets held prior to residency, if recognized after ten years of residency, are subject to a reduced 5% Puerto Rico tax rate.
2. Qualifying as a Bona Fide Resident: To benefit from Act 60, U.S. citizens must meet the “bona fide resident” criteria, which includes spending a minimum amount of time in Puerto Rico (generally 183 days per year) and demonstrating stronger ties to Puerto Rico than to the U.S. This helps ensure that Puerto Rico is considered the primary residence and tax home.
3. Requirements and Compliance: Act 60 mandates certain commitments, such as charitable contributions (now $10,000 annually) and, for new residents, purchasing residential property within two years. Compliance with these requirements, along with strategic tax planning, is essential to avoid potential pitfalls, as U.S. citizens remain subject to tax on worldwide income except for Puerto Rico-sourced income under specific conditions.

The aim of Act 60 is to bring private investment into Puerto Rico’s economy, thus bolstering local economic development and competitiveness while providing significant tax savings to eligible U.S. individuals and businesses.

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