Puerto Rico · Tax & Investment Guide

Puerto Rico Tax Incentives: A Complete Guide to Act 60

A detailed, plain-English guide to Puerto Rico’s incentives for investors, exporters, manufacturers, tourism projects, energy, agriculture, film, finance, and other eligible activities.

Updated September 2026 · LiBe Editorial Research

What Act 60 does—and what it does not do

Puerto Rico Act 60-2019, formally known as the Puerto Rico Incentives Code, consolidated many long-running tax incentive programs into a single framework. The law allows qualifying businesses and individuals to request a tax exemption decree that defines the approved activity, tax treatment, compliance duties, and benefit period.

Act 60 is not an automatic “zero-tax” program. Benefits depend on the applicant, the source and character of income, the location and substance of operations, the terms of the decree, and continuing compliance. U.S. federal rules—including bona fide residence and Puerto Rico-source income tests—remain crucial for many individuals.

This guide expands on the September 2022 Invest Puerto Rico and Kevane Grant Thornton white paper supplied for this article. Because laws, regulations, administrative orders, and interpretations can change, figures below should be treated as an educational starting point rather than a tax opinion.

Important

A decree is the controlling document

Promotional summaries cannot replace the law, regulations, or the individual decree. Confirm eligibility before relocating, buying property, hiring staff, restructuring a company, or realizing gains.

Act 60 at a glance

Common Act 60 headline benefits

These are recurring figures in the source PDF. Each program has its own definitions, exceptions, and compliance conditions.

4%

Fixed tax rate frequently available on eligible business income

75%

Common property-tax exemption for qualifying businesses

50%

Common municipal-tax exemption under standardized terms

15 + 15

Typical 15-year decree term with a possible 15-year extension

Inside this guide

1. How Act 60 works

2. Export services and manufacturing

3. Individual investors and researchers

4. Finance, insurance, and private equity

5. Agriculture and entrepreneurship

6. Energy, pioneer activities, and PYMEs

7. Tourism, hospitality, and cruise incentives

8. Film, Vieques, and Culebra

9. Foreign Trade Zones and Opportunity Zones

10. Real estate and relocation considerations

11. Application and compliance roadmap

12. Sources and professional disclaimer

How Act 60 works

Act 60 export services and manufacturing

Individual investors and researchers

Finance, insurance, and private equity

Agriculture and entrepreneurship

Energy, pioneer activities, and PYMEs

Tourism, hospitality, and cruise incentives

Film, Vieques, and Culebra

Foreign Trade Zones and Opportunity Zones

Real estate and relocation considerations

Application and compliance roadmap

Sources and professional disclaimer

01 · Framework

How Puerto Rico’s Incentives Code works

Act 60 was enacted on July 1, 2019 to bring numerous economic-development incentives into one code. Applications filed from January 1, 2020 forward generally proceed under the Incentives Code, while decrees issued under earlier laws normally continue to be governed by the statute under which they were granted.

The code uses a return-on-investment framework to evaluate whether proposed benefits are expected to advance Puerto Rico’s economic-development objectives. The Department of Economic Development and Commerce (DDEC), through its incentives operation, evaluates applications and administers decrees.

Standardized features described in the source white paper

A 4% fixed Puerto Rico income-tax rate on eligible income for many qualifying business activities.
A 75% exemption from property taxes and a 50% exemption from municipal taxes under many business programs.
A standard decree period of 15 years, potentially extendable for another 15 years.
Research-and-development tax credits of up to 50% for qualifying work directed at resolving scientific or technical uncertainty and producing commercially useful knowledge, products, processes, or services.
Employment requirements that may apply: the PDF states that an export business with projected or actual annual volume above $3 million must have at least one full-time employee, while a manufacturing decree generally requires at least three full-time employees.

Key distinction: a preferential rate generally applies only to income generated by the approved eligible activity. Non-qualifying income, income sourced outside Puerto Rico, salary paid as an employee, and gains accrued before becoming a bona fide resident can follow different rules.

Economic substance matters

The activity—not just the address—must qualify

Operating from Puerto Rico does not, by itself, convert all revenue into exempt income. Applicants must identify the eligible service or activity, document where work is performed, separate qualifying from non-qualifying income, and maintain the people, systems, records, and local presence required by the decree.

02 · Business

Act 60 export services and manufacturing

Export of goods and services

Act 60’s export chapter is intended to encourage Puerto Rico-based operations that serve customers and markets outside Puerto Rico. The source PDF lists a wide range of potentially eligible services, including:

Research and development; advertising and public relations; and economic, environmental, technology, scientific, management, marketing, human-resources, information-systems, engineering, auditing, and other consulting services.
Advisory work connected to industries or businesses; engineering and architectural plans and designs; advanced professional services such as legal, tax, and accounting work; and shared-services centers.
Creative industries, including certain ticket sales, recordings, transmission rights, eSports, fantasy leagues, and productions connected with audiences or purchasers outside Puerto Rico.
Investment banking and other financial services; international trading companies; commercial distribution of Puerto Rico-manufactured products to outside markets; assembly, bottling, and packaging for export markets.
Distribution through physical channels, networks, cloud computing, or blockchain, including subscription, license, and fee revenue where the statutory tests are met.

In addition to the standardized 4% eligible-income rate and municipal/property exemptions, the PDF describes a 100% Puerto Rico income-tax exemption on qualifying dividends or profit distributions. For export businesses with volume under $3 million, it describes a 100% property-tax exemption for the first five years and 75% thereafter; businesses above that threshold generally receive the 75% exemption.

Employment warning: providing services as an employee does not qualify as an export-services business. The structure, customer location, performance of services, income sourcing, and contractual facts must support the eligible activity.

Manufacturing

The manufacturing chapter reaches beyond traditional factory production. The PDF identifies pharmaceutical and device manufacturing, scientific R&D, recycling, hydroponics, port-related value-added activity, software development, renewable-energy equipment, and aerospace R&D among potentially eligible activities.

4% tax on income generated by the eligible manufacturing activity.
12% withholding on royalty payments, creditable against the 4% tax in the circumstances described by the code.
100% exemption on qualifying distributions to owners.
100% exemption from excise and sales-and-use tax on certain raw materials, machinery, and equipment.
75% property-tax exemption; a 50% municipal-tax exemption; and a 75% exemption from certain municipal, excise, and other taxes for qualifying contractors and subcontractors, excluding municipal license tax.
Potential tax credits tied to machinery, equipment, and payroll for full-time employees.

03 · Individuals

Act 60 individual investors and eligible researchers

Resident individual investors

Chapter 2 of Subtitle B may provide Puerto Rico tax relief to qualifying nonresident individuals who relocate and become bona fide residents. According to the supplied PDF, the program is available to an individual who becomes a bona fide Puerto Rico resident on or before December 31, 2035 and who was not a bona fide resident during the specified historical lookback period.

The PDF describes a 100% Puerto Rico exemption for certain interest and dividends arising after bona fide residence begins, as well as special treatment for capital gains. Appreciation arising after residency may receive full Puerto Rico exemption when statutory timing and sourcing rules are satisfied. Pre-move appreciation is treated separately; the PDF describes a 5% Puerto Rico rate in a defined scenario when qualifying gain is recognized after ten years of residence but before January 1, 2036. Federal rules can produce a different result, especially for pre-residency appreciation and non-Puerto Rico-source income.

Conditions highlighted in the source

Provide evidence of a personal or business account with a financial institution or credit union that has a presence in Puerto Rico.
Make an annual $10,000 contribution to an authorized Puerto Rico nonprofit, with $5,000 directed to a nonprofit working to eradicate child poverty, as described in the PDF.
Purchase residential property from an unrelated person within two years after the decree becomes effective.
Actually satisfy U.S. federal bona fide residence rules, including the presence, tax-home, and closer-connection tests. A decree alone does not establish federal tax residence.

IRS Publication 570 explains that bona fide residence requires a fact-specific analysis. Taxpayers may also have U.S. information-reporting duties and must distinguish Puerto Rico-source income from U.S.- or foreign-source income. Section 933 may exclude certain Puerto Rico-source income from U.S. gross income for a bona fide resident, but it does not erase every federal tax or filing obligation.

Researchers and scientists

The PDF describes an exemption of up to $195,000 of salary for an eligible researcher or scientist contracted by the University of Puerto Rico or another authorized higher-education institution engaged in eligible scientific research. It also describes an exemption of up to $250,000 for eligible research performed within the district created under Act 214-2004 for the Puerto Rico Science, Technology and Research Trust. A decree applicant in this category must complete at least 60 hours of community service per year under the terms of the decree.

04 · Capital

Act 60 finance, insurance, and private equity

International Financial Entities

An International Financial Entity may request a 15-year decree securing standardized benefits such as a 4% income-tax rate and municipal/property exemptions. The PDF also describes a 6% Puerto Rico tax rate on distributions to Puerto Rico-resident owners and a 100% exemption on distributions to nonresident owners. Federal sourcing and bona fide residence rules remain central when distributions are received by individuals.

International insurers and reinsurers

Qualifying insurers generally cover risks outside Puerto Rico, although certain surplus-lines and reinsurance activity involving Puerto Rico risks may be permitted. Licensing and supervision by the Puerto Rico Insurance Commissioner are required. The source describes:

A 4% rate on eligible income exceeding $1.2 million.
100% exemption from branch-profits tax.
100% exemption for qualifying dividends, profit distributions, and liquidation distributions.
75% property-tax and 50% municipal-tax exemptions.

Private equity funds

A partnership or limited-liability company organized in Puerto Rico, the United States, or another jurisdiction may qualify as a Puerto Rico private equity fund (PRPEF) or private equity fund (PEF) when it satisfies the statutory investment, governance, and portfolio requirements.

The PDF describes a 100% municipal-tax exemption, 75% property-tax exemption, and a 15-year decree renewable for 15 more years.
Accredited resident investors may receive a 10% rate on distributable interest and dividends, full exemption on distributable capital gains, and a 5% rate on gains from selling a fund interest unless proceeds are timely reinvested in a PRPEF.
Managing and general partners may receive a 5% rate on distributable interest/dividends, 2.5% on distributable capital gains, and 5% on gains from selling a fund interest.
The PDF describes a deduction of up to 30% of the initial PEF investment over ten years, limited annually to 15% of pre-deduction net income. For a PRPEF, it describes up to 60% over fifteen years, limited annually to 30% of pre-deduction net income.
Certain net capital losses may be deductible when tied to companies generating at least 80% of gross income from Puerto Rico sources.

2026 compliance update: DDEC announced strengthened operating guidance for private equity funds. The agency emphasized active business activity, clarified treatment of mixed and passive entities, added safeguards for related-party investments and capital recycling, introduced 24-month retention concepts for specified contributions, and stated that deductions should be based on net amounts actually invested. Current fund structures should be reviewed against the latest order—not only the 2022 white paper.

05 · Local Growth

Act 60 agriculture and young entrepreneurship

Agroindustry

Benefits may be available to bona fide farmers and agricultural enterprises engaged in qualifying Puerto Rico operations. The source covers land cultivation for food, spices, seeds, animal feed, and industrial inputs; livestock for meat, milk, and eggs; horse breeding; local agricultural processing; Puerto Rico milk production and processing; packing and labeling local produce; marine fishing and aquaculture; ornamental plants and grasses; hydroponics; and grain production through qualifying farmer associations.

90% exemption on income directly derived from the eligible agroindustrial activity. Passive income and gains not directly produced by the activity are generally outside this benefit.
100% exemption for qualifying interest on specified agricultural debt instruments.
100% property-tax exemption for eligible real and personal property used at least 35% in the qualifying activity.
100% municipal-license-tax exemption and specified excise, sales-and-use, stamp, and Property Registry fee exemptions.
Potential annual worker bonus and wage-subsidy programs subject to the applicable rules.

Entrepreneurship for residents ages 16–35

The program described in the PDF is aimed at Puerto Rico residents between ages 16 and 35 who create and operate a new long-term business. It may provide a 100% exemption on the first $500,000 of net taxable income, plus 100% exemptions on personal-property and municipal-license taxes.

The business must generally start after the application is filed, be operated exclusively by the eligible individual, and not be created through an affiliate or reorganization. Benefits are limited to one new business per eligible individual, while distributions to owners remain subject to the applicable Puerto Rico tax rules.

06 · Innovation

Act 60 energy, pioneer activities, and PYMEs

Renewable and highly efficient energy

Qualifying businesses producing renewable or highly efficient energy on a commercial scale may combine the standardized 4% eligible-income rate with additional benefits. The PDF lists solar, wind, geothermal, landfill gas, anaerobic digestion, fuel cells, waste heat, renewable biomass, renewable biofuels, qualified hydropower, marine and hydrokinetic energy, and ocean thermal energy. An off-grid eligible business is not necessarily required to sell power to PREPA to maintain its decree.

12% withholding on royalty payments, creditable against the 4% rate under the described rules.
100% exemption on qualifying distributions to owners.
100% deductibility of qualifying investment in buildings, structures, machinery, and equipment.
100% excise and sales-and-use tax exemption on specified raw materials, machinery, and equipment.
75% property-tax exemption; 50% municipal-tax exemption; and 75% exemption from certain contractor and subcontractor taxes, excluding municipal license tax.
Potential tax credits subject to eligibility and allocation.

Pioneer activities

A pioneer activity is one not previously conducted in Puerto Rico during the preceding twelve months and possessing special attributes for socioeconomic development. The source states that eligible income receives a 4% fixed rate, which DDEC may reduce as low as 1% in consultation with the Puerto Rico Treasury.

Small and medium businesses (PYMEs)

The PDF defines a PYME, for this context, as an eligible business with average gross receipts of $3 million or less during the prior three years. During its first five years of operations, the source describes a 2% rate on eligible income, 100% property-tax exemption, 100% municipal-tax exemption, and tax credits of up to 30% for purchases of products manufactured in Puerto Rico.

Beyond finance

Incentives reach the productive economy

Act 60 is broader than individual investor and export-service programs. Its framework also supports agriculture, renewable energy, manufacturing, research, tourism, film, and place-based development when projects create qualifying economic activity.

07 · Visitor Economy

Act 60 tourism, hospitality, and cruise incentives

Hotel and hospitality services

Act 60 provides incentives to eligible new tourism developments and to existing tourism businesses undertaking substantial expansion or renovation. Potential activities include hotels, condo hotels, timeshares and vacation clubs, hostels, guesthouses, bed-and-breakfasts, inns in the Paradores de Puerto Rico program, theme parks, golf courses, tourism marinas, qualifying port facilities, natural-resource attractions, entertainment and recreation facilities, and leasing property to an exempt tourism business.

The source defines a new business by reference to prior use of the facilities, including 36- and 18-month lookback concepts in specified cases. An acquired existing business or property undergoing expansion or renovation exceeding 100% of acquisition cost or fair market value must complete the investment within 36 months to satisfy the described eligibility rule.

Tourism investment tax credits

An investor acquiring an equity interest in an entity developing an eligible tourism business may choose between two credit structures described in the PDF:

A 40% credit on eligible investment, claimed in three equal installments beginning in the second year of operation; or
A 30% credit, with 10% available in the year development financing is secured and the balance in three equal installments beginning when the activity receives its first paying guest.

Because eligible credits may be assigned, transferred, or sold, developers sometimes monetize them in Puerto Rico’s capital market to reduce the equity required in a project’s capital stack. The source also lists a 4% eligible-income rate, 12% royalty withholding creditable against that rate, exempt owner distributions, specified excise and sales-and-use exemptions, 75% property-tax relief, 50% municipal-tax relief, and contractor/subcontractor relief.

Cruise-line industry

The PDF describes reimbursements designed to support homeport and transit calls, local purchasing, ship maintenance and repair, tourism packages, and passenger excursions. Cruise operators may receive a 10% reimbursement for qualifying food and beverage purchases or maintenance and repair services while docked at a Puerto Rico port, plus an additional 5% for qualifying Puerto Rico-manufactured or agricultural products.

08 · Creative & Place-Based

Film incentives, Vieques, and Culebra

Film production

The film chapter supports eligible audiovisual production and infrastructure. The PDF lists feature and short films, documentaries, television programs, episodic and mini-series, music videos, national and international commercials, video games, recorded live performances, original soundtracks, and dubbing.

40% tax credit on qualifying payments to Puerto Rico residents.
20% tax credit on qualifying payments to nonresident talent, with the described 20% withholding.
Up to 15% credit on Puerto Rico production expenses—capped at $4 million—in qualifying full-length films, series, or documentaries led by a domestic producer and meeting specified key-person requirements.
100% exemption from income, withholding, or sales-and-use tax on specified personal-property rental payments to qualifying nonresident or foreign persons.
20% Puerto Rico income-tax treatment for specified compensation paid to nonresident individuals or entities hiring them for services connected to the film project.
Specified exemptions for raw materials, machinery, equipment, owner distributions, and certain contractor/subcontractor taxes.
A decree generally tied to the duration of the film project; studio operators may receive a 15-year decree.

Vieques and Culebra

For an eligible business operating in Vieques or Culebra, the source describes enhanced first-five-year benefits: a 2% eligible-income rate, 100% property-tax exemption, 100% municipal-tax exemption, and up to 30% in nontransferable tax credits for purchases of Puerto Rico-manufactured products.

09 · Location Strategy

Foreign Trade Zones and Opportunity Zones

Foreign Trade Zones

Puerto Rico’s noncontiguous Foreign Trade Zone system can defer customs and Puerto Rico excise tax as goods move through qualifying zones. The PDF lists deferment of federal customs duties and Puerto Rico excise taxes, full exemption on manufacturing lead time for exports outside the United States, full exemption on tangible property and equipment used in the zone, a 60% exemption on property value classified as intangible, and full exemption on exports from zones and subzones.

Opportunity Zones

The 2022 white paper states that approximately 98% of Puerto Rico had been designated as a Qualified Opportunity Zone and explains Puerto Rico’s policy of attracting qualified opportunity funds to priority projects. Eligible investments can include cash contributed for equity in an Opportunity Zone fund or qualifying business, subject to detailed federal and Puerto Rico requirements.

The source defines an eligible business as operating entirely in an Opportunity Zone, investing in qualifying Opportunity Zone property, carrying out a priority project, and not already qualifying for a decree under an earlier incentive law. Export, manufacturing, tourism, energy, and film businesses may still participate in the federal capital-gain framework through an Opportunity Zone fund, but cannot use the separate investment-benefit credit to obtain the same decree.

Priority projects and local benefits described in the PDF

Priority projects include certain low-income residential development, residential/commercial/industrial property development for sale or rent, and substantial improvement of existing commercial property. Projects outside the official list generally need a priority-project designation before applying.

18.5% Puerto Rico income-tax rate on qualifying activity and 18.5% royalty withholding.
100% exemption on qualifying distributions and specified interest income.
25% property-tax and municipal-tax exemptions, potentially supplemented by municipalities up to the limits allowed.
A guaranteed 5% transferable investment tax credit, potentially increased to 25%.

Current-law caution: federal Opportunity Zone timing rules and Puerto Rico’s priority-project list can change. Review current federal guidance, current DDEC resolutions, and the specific property census tract before relying on this strategy.

10 · Property

Real estate and relocation considerations

Act 60 often affects real estate decisions, but it is not a blanket real-property tax exemption for every person who moves to Puerto Rico. The property consequences depend on the incentive chapter, the owner, the use of the property, municipal rules, and the decree.

For individual investor decree holders

The source describes a requirement to purchase residential property from an unrelated person within two years after the decree’s effective date.
The home purchase does not replace the federal bona fide residence tests. Presence, tax home, closer connection, family, banking, voting, licensing, and day-to-day life may all matter.
Rental income, gain from Puerto Rico real estate, pre-move appreciation, and business income must be sourced and classified separately. Do not assume every gain becomes exempt after relocation.

For businesses and development projects

Confirm whether the property is owned by the exempt business, leased to it, or held in a separate entity—and whether that structure is recognized by the decree.
Model property tax, municipal license tax, sales-and-use tax, construction tax, permits, insurance, utilities, financing, and closing costs before valuing the incentive.
For tourism, agriculture, energy, manufacturing, and Opportunity Zone projects, document eligible use, investment timing, construction and renovation thresholds, and related-party transactions.
Run title, zoning, environmental, flood, coastal, condominium, short-term-rental, and permitting due diligence independently of the tax analysis.

LiBe’s marketplace can help readers explore property opportunities, but tax eligibility, legal structure, residency, and investment suitability should be reviewed with licensed Puerto Rico professionals before a transaction.

11 · Action Plan

Application and compliance roadmap

Define the applicant and eligible activity. Identify the individual, operating company, fund, or project and the exact Act 60 chapter under which relief is requested.
Map income and operations. Separate Puerto Rico-source, U.S.-source, and foreign-source income; eligible and non-eligible revenue; pre-move and post-move appreciation; and owner, employee, and contractor compensation.
Build the substance plan. Document Puerto Rico personnel, premises, banking, contracts, decision-making, assets, customers, operational processes, and required investment.
Model the full cost. Include application and professional fees, payroll, charitable contribution, property purchase, municipal costs, insurance, permits, annual reporting, and audit or certification requirements—not only the headline tax rate.
Apply through the current DDEC process. Use the current incentives portal and provide the legal, financial, ownership, operational, and project documents required for the specific chapter.
Review the proposed decree. Confirm the approved activity, effective date, tax rates, exemptions, employment or investment conditions, reporting terms, and revocation or recapture provisions.
Maintain annual compliance. File required Puerto Rico and federal returns, annual decree reports, municipal and property-tax filings, evidence of donations or property ownership when applicable, and records supporting income sourcing.
Recheck before major events. Obtain advice before selling appreciated assets, changing residence, reorganizing ownership, adding new revenue streams, buying or selling property, or modifying operations.

A practical decision test

The best candidate is not simply the person or business attracted by a low rate. It is the applicant whose actual life or operating model can satisfy the law, whose qualifying income is large enough to justify the cost and complexity, and whose long-term plans fit Puerto Rico even if future rules become less favorable.

Research standards

Sources, Update Notes & Disclaimer

Primary Sources

Invest Puerto Rico and Kevane Grant Thornton: “A New Era in Puerto Rico: Act 60” (updated September 2022).
Puerto Rico Act 60-2019, Incentives Code, as originally enacted; consult amendments and regulations.
DDEC guidance concerning private equity funds.
IRS Publication 570.

Update Notes

This article was independently rewritten and expanded from the supplied source material. It summarizes the source and adds current context and real-estate planning considerations.

Last reviewed: September 2026.

Professional Disclaimer

This article provides general information—not legal, tax, accounting, investment, immigration, or real-estate advice. Eligibility depends on current law, application, decree terms, income sourcing, and continuing compliance. Consult qualified Puerto Rico and U.S. professionals before acting. LiBe does not guarantee eligibility, savings, decree approval, investment results, or property performance.

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