Individual Investors Chapter • Export Services Chapter • Federal vs. PR Tax Comparison
Act 60 of Puerto Rico (2019)Act 38-2026 (signed Mar 10, 2026)IRC §933Treas. Reg. §1.937-1⚠ Dec 31, 2026 Deadline
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Act 38-2026 Deadline: December 31, 2026. Applications filed before January 1, 2027 qualify for 0% PR tax on post-move capital gains, dividends, and interest. Applications filed on or after January 1, 2027 will be subject to a 4% rate under Act 38-2026 (signed March 10, 2026). This is a permanent rate change - not a temporary reduction.
1
Eligibility Assessment
183+ days required for bona fide residency presumption. Treas. Reg. §1.937-1(b).
2
Annual Income Profile
Passive Income (Act 60 Chapter 2 - Individual Investors)
Gains on assets acquired after becoming PR resident. 0% PR tax (4% if post-2026 applicant). IRC §933.
All dividends (PR, US, and foreign source). 0% PR tax (4% post-2026). IRC §933.
Pre-Move Appreciation (Built-In Gains - Still Taxable by IRS)
Unrealized appreciation on assets owned before PR move. US federal capital gains tax applies when sold. Allocated by IRS residency days ratio.
Business / Service Income (Act 60 Chapter 3 - Export Services)
Income from qualifying services provided to non-PR clients (consulting, tech, finance, etc.). 4% PR corporate tax rate. Act 60 Ch. 3.
Wages, salary, or self-employment income from U.S. sources. NOT exempt under Act 60. Subject to US federal income tax. IRC §933(1).
Federal rule (IRC §933): A bona fide Puerto Rico resident excludes Puerto Rico-source income from federal gross income. U.S.-source income is still taxable to the US federal government. Bona fide residency is determined under Treasury Reg. §1.937-1 - presence test (183+ days), tax home test, and closer connection test all apply.
3
Rate Comparison
Without Act 60 (U.S. Mainland)
Long-term capital gains20%
Qualified dividends20%
Interest incomeUp to 37%
NIIT surcharge (if AGI>&thresh;)+3.8%
Business / export servicesUp to 37%
State tax (varies)0-13.3%
→
With Act 60 (PR Resident, Pre-2027 App)
Post-move capital gains (PR)0% PR + 0% Fed
Dividends (PR-source)0% PR + 0% Fed
Interest (PR-source)0% PR + 0% Fed
NIIT on exempt PR income0%
Export services (PR entity)4% PR corp tax
State tax on PR income0% (none)
Pre-move built-in gains: Capital appreciation that accrued BEFORE establishing PR residency remains taxable by the IRS when sold (allocated by days-of-ownership method). After 10 years of continuous PR residency, all remaining gains are treated as Puerto Rico-source and receive preferential treatment. Act 60 §2023.01.
4
Estimated Tax Savings Analysis
Tax Without Act 60
$0
US federal + state
Tax With Act 60
$0
Federal on US-source only
Estimated Annual Savings
$0
Before compliance costs
Detailed Tax Comparison
Income Category
Amount
Tax Without Act 60
Tax With Act 60
Annual Savings
Total
$0
$0
$0
$0
Annual Compliance Costs (Act 60)
Annual Charitable Contribution
$10,000
Required donation to two qualifying Puerto Rico nonprofits. Act 60 §2023.01(b)(3).
Annual Compliance Filing Fee
$5,005
Annual fee to maintain Act 60 decree in good standing. DDEC (Puerto Rico Department of Economic Development).
Total Annual Compliance Cost
$15,005
Minimum annual cost. Does not include CPA, attorney, or relocation expenses.
Net Annual Benefit (After Costs)
$0
Enter income above to calculate.
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One-Time Application Costs: Application fee $5,005 + acceptance fee $105 = $5,110 one-time. Legal/CPA fees for decree preparation typically add $5,000-$20,000. Real estate acquisition required within 2 years of decree (no minimum price specified, but must be your principal residence).
Source: Act 60 of Puerto Rico (P.R. Laws Ann. tit. 13, §10001 et seq.); Act 38-2026 (signed March 10, 2026); IRC §933 (exclusion of PR-source income for bona fide PR residents); Treas. Reg. §1.937-1 (bona fide residency); Act 60 Ch. 2 (Individual Investors); Act 60 Ch. 3 (Export Services).
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