Puerto Rico Act 60 (2026): 0% capital gains, 4% business tax and the catches

Tax & Residency
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Puerto Rico’s Act 60 still offers US citizens 0% Puerto Rico tax on capital gains, interest and dividends earned after they become bona fide residents, but only for resident individual investor applications filed by 31 December 2026. Act 38-2026 replaces the 0% with a fixed 4% rate for applications filed from 1 January 2027, and extends the programme to 2055. Export services businesses can still get a 4% corporate rate. The catch is the IRS: you must pass the Section 937 bona fide residence test every year, and gains built up before you moved stay US-taxable.

Last checked: October 2026

In short:

  • Resident individual investor applications filed by 31 December 2026 get 0% on post-move capital gains, interest and dividends until 31 December 2035; applications from 1 January 2027 get a fixed 4% rate until 31 December 2055.
  • The investor decree costs a $5,000 application fee, a $10,000 annual donation, a $5,000 annual report filing fee and a home purchase in Puerto Rico within two years.
  • Puerto Rico’s tax break does nothing for US federal tax unless you are a bona fide resident under Section 937 (presence, tax home and closer connection tests), and the IRS runs a dedicated compliance campaign on these decrees.

How Act 60 works for a US citizen

US citizens are taxed by the US on worldwide income wherever they live. Puerto Rico is the exception that matters. Under Internal Revenue Code Section 933, a bona fide resident of Puerto Rico excludes Puerto Rico-source income from US federal income tax. Puerto Rico then taxes that income, and Act 60 (the Puerto Rico Incentives Code) cuts Puerto Rico’s tax to 0% or 4% on qualifying income.

So the structure has two layers:

  1. US federal layer. You must be a bona fide resident, and the income must be Puerto Rico-source. US-source income (for example, salary for work done in the US, or gains on assets you held before moving) is still taxed by the IRS.
  2. Puerto Rico layer. Your decree from the Department of Economic Development and Commerce (DDEC) sets your Puerto Rico rate on qualifying income.

PwC lists Puerto Rico’s top regular individual rate at 33%, so income outside your decree, such as a salary from your own company, can be taxed heavily.

The two main decrees

Decree Who it suits Puerto Rico tax rate Key costs and conditions
Resident individual investor (IRI), applied for by 31 Dec 2026 Investors with large portfolios 0% on post-move capital gains, interest and dividends, until 31 Dec 2035 $5,000 application fee; $10,000 annual donation; $5,000 annual report fee; buy a home within 2 years
Resident individual investor, applied for from 1 Jan 2027 Same 4% on post-move capital gains, interest and dividends, until 31 Dec 2055 As above, plus 6-year prior non-residence rule and stricter home ownership rules
Export services business Founders selling services to clients outside Puerto Rico 4% corporate income tax on eligible income; dividends from it 100% exempt $1,000 application fee; real operation in Puerto Rico

Sources: DDEC Informative Bulletin 2026-004, DLA Piper and Reichard & Escalera on Act 38-2026, RSM on the regulation’s filing fees, PwC on the 4% rate.

What Act 38-2026 changed

Act 38-2026 is the biggest change to the investor decree since it launched. DDEC says the Act was enacted on 10 March 2026. DLA Piper reported in March 2026 that it was still pending final endorsement by the Financial Oversight and Management Board; DDEC’s April 2026 bulletin explains how DDEC is applying it.

  • 0% window closes on 31 December 2026. DDEC says applications filed before 1 January 2027 “will be deemed as applications requesting the 0% tax rate”, with a decree expiry date of 31 December 2035.
  • 4% for new applicants. Applications from 1 January 2027 get a 4% fixed rate on interest, dividends and post-residency capital gains until 31 December 2055.
  • Opt-in for existing holders. DLA Piper says investors who obtained or requested a decree before 31 December 2026 may modify it to adopt the new regime, swapping 0% to 2035 for 4% to 2055.
  • Pre-move gains. Gains on assets held before the move, recognised after 10 years of residence, are taxed by Puerto Rico at 5%. That is a Puerto Rico rate; the US federal treatment is separate (see below).
  • Longer look-back. For applications filed before 2027, you must not have been a Puerto Rico resident between 17 January 2006 and 17 January 2012. From 2027, you must not have lived in Puerto Rico for the six years immediately before you relocate.
  • Home ownership. From 2027, DDEC says the home must be held directly in your name, jointly with your spouse, or in a trust, and Reichard & Escalera says it must be registered (or pending registration) in the Puerto Rico Property Registry.

If you are seriously considering a move, the timing question is real: filing in 2026 locks in 0%, but only to 2035.

The annual costs of an investor decree

Item Amount Notes
Application fee $5,000 Filing fee for individual investors in the Incentives Code regulation
Annual donation $10,000 At least $5,000 to listed child-poverty nonprofits; of the rest, at least $2,500 to the Special Fund for Social Equality
Annual report filing fee $5,000 Raised from $300 by Act 40-2020
Home purchase Price varies Bought from an unrelated owner within 2 years and kept as principal residence for the decree term

DDEC’s January 2026 circular letter on donations says the $10,000 must go to nonprofits not controlled by you or your relatives, and penalties for missing the $2,500 Special Fund contribution start in 2026. Evidence goes with your annual report.

The IRS side: Section 937 bona fide residence

Your decree does not make you a bona fide resident. The IRS decides that, using three tests that must all be met for the tax year (IRS Publication 570).

1. Presence test. Meet any one of these:

  • at least 183 days in Puerto Rico during the tax year;
  • at least 549 days over the current and two previous years, with at least 60 days in each year;
  • no more than 90 days in the United States during the year;
  • no more than $3,000 of US earned income and more days in Puerto Rico than in the US;
  • no significant connection to the United States during the year.

2. Tax home test. You must not have a tax home outside Puerto Rico during any part of the year. Your tax home is your regular or main place of business, employment or post of duty.

3. Closer connection test. You must not have a closer connection to the US or a foreign country than to Puerto Rico. The IRS looks at where your permanent home, family, personal belongings, social and religious organisations, banks and voter registration are.

Year of move. You can be treated as a bona fide resident for the year you move if you were not a bona fide resident in any of the 3 previous tax years, have no tax home outside Puerto Rico and no closer connection elsewhere for at least the last 183 days of that year, and are a bona fide resident in each of the 3 following tax years.

Form 8898. You must file Form 8898 for the year you become, or stop being, a bona fide resident if your worldwide gross income that year is more than $75,000.

A common failure is keeping a house, spouse, doctors and car registration in the mainland US while counting days in San Juan. Days alone do not pass the closer connection test.

Pre-move gains are still US-taxable

This is the trap that catches investors who move with appreciated stock or crypto. Under Treasury Regulation 1.937-2(f)(1), if you were a US citizen or resident in any of the 10 years before, gain on property you owned before becoming a Puerto Rico resident is generally treated as US-source, so the IRS taxes it, even if you sell after moving.

There is an election: you can treat the gain attributable to your Puerto Rico holding period as Puerto Rico-source. For marketable securities, that portion is measured from the fair market value at the close of the market on the first day of your Puerto Rico residence. In practice, only post-move appreciation escapes US tax.

Puerto Rico’s own 5% rate on pre-move gains (after 10 years) does not override the US rule.

The IRS compliance campaign

The IRS Large Business and International division runs an active campaign called “Puerto Rico Act 22, Individual Investors Act” (Act 22 was the investor law that Act 60 replaced). The IRS describes it as addressing taxpayers who claim the benefits, focusing on whether they meet the Section 937 residence and source rules and whether they are excluding US-source income. RSM reported in 2021 that more than 20 IRS agents and accountants were working on the island and that the IRS identifies taxpayers through Section 933 claims and information sharing with Puerto Rico’s Treasury.

Expect an audit to ask for travel records, a day count, where your family lives, and how you sourced each gain.

Who it works for, and who it does not

Related guides: Low-tax residency for high earners (2026): 14 regimes compared · Tax residency explained: why the 183-day rule is a myth for most countries · How to leave the US (2026): a checklist for moving out of the US · US expat taxes (2026): filing, FEIE, FBAR and catching up · Exit tax explained: which countries charge it when you leave

Quick answers

Q: Is Puerto Rico’s 0% capital gains rate still available in 2026?
Yes, for resident individual investor applications filed with DDEC by 31 December 2026. Those decrees give 0% on post-move capital gains, interest and dividends until 31 December 2035. Applications from 1 January 2027 get a fixed 4% rate until 2055 under Act 38-2026. You must still become a bona fide resident.

Q: How much does Act 60 cost each year?
For a resident individual investor, the recurring costs are a $10,000 annual donation to approved nonprofits and the special social equality fund, plus a $5,000 annual report filing fee. The one-off application fee is $5,000. You must also buy a home in Puerto Rico within two years, so budget for property costs.

Q: Do I pay US tax on gains if I move to Puerto Rico?
On gains from assets you owned before moving, generally yes. Treasury regulations treat that gain as US-source if you were a US citizen or resident in the previous 10 years. An election lets you treat appreciation after you became resident as Puerto Rico-source, so only post-move growth can benefit from Act 60.

Sources

This is general information from the Nomad Forums team, not legal, tax or financial advice. Rules change; check the official source or a qualified adviser before acting.

Over to you: If you hold an Act 60 decree, are you filing before the 31 December 2026 deadline or weighing the 4%-to-2055 swap? And for anyone who has been through an IRS residence audit, what records did they ask for?

Low-tax residency for high earners (2026): 14 regimes compared