Act 60 Individual Investor vs Export Services Puerto Rico

Puerto Rico's Act 60 is one of the most discussed tax incentive frameworks available to U.S. citizens — and one of the most misunderstood. Most people who encounter it hear one of two things: either that it eliminates capital gains taxes, or that it provides a 4 percent corporate rate for businesses. Both of those statements are true. What is less commonly explained is that they refer to two entirely different chapters of the law, designed for two entirely different profiles of person.

Understanding which chapter applies to your situation — and whether you can benefit from both — is the starting point for any serious Act 60 conversation.

What Act 60 Is and Where It Came From

Act 60-2019 consolidated and superseded previous tax incentive laws, including Act 20, the Export Services Act, and Act 22, the Individual Investors Act. The core benefits for individual investors and export service companies remain largely similar to what those earlier laws provided, but Act 60 introduced new requirements, including mandatory charitable contributions and a residential property purchase requirement for individuals. Uncle Kam

Act 60 benefits are granted through individual tax decrees — legally binding agreements between the applicant and the Puerto Rico government that guarantee specific tax rates and exemptions for a defined period, typically 15 years with the option to extend. This contractual structure is meaningful: it provides a level of certainty that standard tax legislation does not. Riefkohl Law

Chapter 2: The Individual Resident Investor Decree

Chapter 2 of Act 60 — formerly Act 22 — is designed for individuals. Its primary benefit is the treatment of passive investment income.

Chapter 2 provides 100 percent tax exemption from Puerto Rico income taxes on all interest and dividend income, and on certain capital gains realized and accrued after the individual becomes a bona fide resident of Puerto Rico. Mcvpr

This is the chapter most associated with investors, cryptocurrency traders, stock market participants, and high-net-worth individuals whose income is driven by capital appreciation rather than active business operations. The mechanism is straightforward: once you establish bona fide residency in Puerto Rico and obtain your decree, gains on assets purchased after your move are taxed at zero percent in Puerto Rico.

To qualify as a bona fide resident, an applicant must be physically present in Puerto Rico for at least 183 days during the tax year, maintain Puerto Rico as their principal place of business, and demonstrate that their closest personal and economic connections are to Puerto Rico rather than any other jurisdiction. Riefkohl Law

Additional requirements under the Individual decree include purchasing a primary residence in Puerto Rico within two years of obtaining the decree and making an annual charitable contribution — currently set at $10,000 per year to a registered Puerto Rico nonprofit organization. Riefkohl Law

Chapter 3: The Export Services Decree

Chapter 3 of Act 60 — formerly Act 20 — is designed for businesses. Specifically, it applies to companies that provide services to clients located outside Puerto Rico.

Export service businesses under Act 60 Chapter 3 benefit from a 4 percent fixed corporate income tax rate, a 100 percent exemption on distributions from the exempt business, a 75 percent exemption on municipal license taxes, and a 60 percent exemption on property taxes. Riefkohl Law

Among the eligible export service activities are professional and consulting services, financial services, creative industries including design, art, music, app development, and video game development, cloud computing and technology distribution, and commissions on sales to customers outside Puerto Rico. Mcvpr

To qualify, the business must maintain a physical presence on the island — including leased or owned commercial office space — and hire at least one full-time employee in Puerto Rico once certain revenue thresholds are reached. The decree applies to business income generated from clients outside Puerto Rico, not to income derived from local Puerto Rican customers. Insogna CPA

Can You Hold Both Decrees?

Yes — and for many Act 60 relocators, combining both chapters is the most strategically complete approach.

A business owner who relocates to Puerto Rico, operates a service business with mainland clients under Chapter 3, and also holds investment portfolios or cryptocurrency can structure both an Export Services decree for business income and an Individual Investor decree for passive income. Taxpayers may receive both the Puerto Rico incentives and a federal tax exemption on Puerto Rico-sourced income if they meet the requirements for both, thereby increasing the overall tax advantage of relocating to Puerto Rico. Gao

The critical point is that each decree requires separate application, separate compliance, and separate ongoing maintenance. Holding both means managing both sets of obligations.

The 2026 Deadline and What Changed

The most time-sensitive element of Act 60 in 2026 applies specifically to the Individual Investor chapter. Act 38-2026, signed by Governor González-Colón, extends the Individual Resident Investor program through December 31, 2055 but imposes a 4 percent income tax on dividends, interest, and certain capital gains for investors who submit decree applications after December 31, 2026. DLA Piper

Investors who apply for and obtain their decree on or before December 31, 2026 retain the current structure: capital gains realized after becoming a Puerto Rico resident are generally subject to 0 percent Puerto Rico tax if recognized before January 1, 2036. Procopio

The Export Services chapter — Chapter 3 — is not subject to this same rate change. The 4 percent flat corporate rate on export services income remains unchanged under Act 38-2026. The urgency around the December 2026 deadline applies to individual investors specifically.

IRS Scrutiny: What Applicants Must Understand

Act 60 is a legal and legitimate tax incentive program. It is also one of the most closely monitored by the IRS. The IRS has made very clear that it will scrutinize whether income is truly Puerto Rico-sourced. Taxpayers must keep meticulous records of where services are performed — travel logs, contracts, and billing records are crucial in a sourcing dispute. Holland & Knight

Common mistakes that can jeopardize Act 60 benefits include failing to establish genuine Puerto Rico residency, not maintaining adequate business substance for export service decrees, misclassifying income as eligible export service income, failing to file required annual reports on time, not purchasing residential property within the required window, and inadequate record-keeping to support claimed tax benefits. Riefkohl Law

The answer is not to avoid Act 60 — it is to approach it properly, with experienced legal and tax counsel from the outset.

Act 60 and Real Estate in Puerto Rico

For buyers using Act 60 as part of a relocation strategy, real estate is not just a lifestyle decision — it is a compliance requirement. The Individual Investor decree requires the purchase of a primary residence in Puerto Rico within two years of decree approval. The quality, location, and structure of that purchase matters both for lifestyle and for documentation purposes.

At InvEstate Puerto Rico, we work with Act 60 relocators as a core part of our practice. We understand the timeline, the property requirements, and the neighborhoods — Condado, Dorado, Guaynabo, Old San Juan — where Act 60 buyers have established successful long-term residencies. We also work alongside tax counsel and CPAs to make sure the real estate acquisition is aligned with the broader compliance picture.

If you are evaluating Act 60 and want to understand how the real estate component fits into your relocation plan, contact us directly. The deadline at the end of 2026 is real, and the planning window is shorter than most people expect.

Frequently Asked Questions

What is the difference between Act 60 Individual Investor and Export Services?

The Individual Investor decree, Chapter 2, is designed for people whose income comes from passive sources — capital gains, dividends, and interest. The Export Services decree, Chapter 3, applies to businesses that provide services to clients located outside Puerto Rico. The Individual decree taxes qualifying passive income at 0 percent for current applicants. The Export Services decree provides a 4 percent flat corporate tax rate on eligible business income.

Can I hold both an Individual Investor and an Export Services decree?

Yes. Many Act 60 relocators hold both. A business owner who also manages an investment portfolio can structure an Export Services decree for business income and an Individual Investor decree for passive income. Each requires a separate application and separate ongoing compliance.

Who qualifies for the Act 60 Individual Investor decree?

You must become a bona fide resident of Puerto Rico — meaning at least 183 days per year on the island, with Puerto Rico as your principal place of business and your primary personal and economic connections. You must also have not been a Puerto Rico resident during a defined prior period, purchase a primary residence within two years of obtaining the decree, and make annual charitable contributions to a registered Puerto Rico nonprofit.

Who qualifies for the Act 60 Export Services decree?

Businesses that provide eligible services — including professional consulting, financial services, technology, creative industries, and more — to clients located outside Puerto Rico. The business must maintain a genuine physical presence on the island and hire at least one local employee once revenue thresholds are met.

What is the 2026 Act 60 deadline and why does it matter?

Applications for the Individual Investor decree filed on or before December 31, 2026 qualify for the 0 percent tax rate on capital gains, dividends, and interest. Applications filed after that date will be subject to a 4 percent rate under Act 38-2026. The Export Services chapter is not affected by this rate change.

Does Act 60 eliminate U.S. federal taxes as well?

Act 60 addresses Puerto Rico taxes, not U.S. federal taxes. However, under Section 933 of the U.S. Internal Revenue Code, bona fide residents of Puerto Rico are generally exempt from U.S. federal taxes on Puerto Rico-sourced income. Proper structuring, documentation, and compliance are essential — the IRS actively scrutinizes Act 60 claims.

Is Act 60 still worth pursuing after the 2026 deadline?

Yes, but with a different financial picture. Post-2026 applicants will pay 4 percent on qualifying passive income rather than 0 percent, and will face a six-year look-back residency requirement. For investors in high federal tax brackets, 4 percent still represents a significant advantage over mainland rates. The program extends through 2055 under Act 38-2026.

How does Act 60 affect the real estate purchase requirement?

Individual Investor decree holders must purchase a primary residence in Puerto Rico within two years of obtaining their decree. This is a compliance requirement, not optional. The purchase must be properly documented and the title must be in the name of the investor or eligible entity.

Work With a Team That Understands Act 60 From the Inside

Choosing the right decree — and making sure your real estate acquisition supports your compliance obligations — requires more than a general understanding of the law. At InvEstate Puerto Rico, we work with Act 60 buyers every day. We know the neighborhoods, the timelines, and the questions that matter before you sign anything.