Disclaimer: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of WERC.
Imagine a place where you can enjoy year-round tropical weather, stunning beaches, and a vibrant culture—while significantly lowering your tax burden. Puerto Rico is quickly emerging as a premier destination for individuals and businesses seeking a tax-friendly environment within the U.S. tax and legal framework. Thanks to the island’s strategic status as a U.S. territory and the generous tax incentives provided by Act 60-2019, Puerto Rico is fast becoming the top choice for savvy investors, entrepreneurs, and companies looking for both financial advantages and a tropical lifestyle.
A Glimpse at Puerto Rico’s Act 60-2019 Incentives Code
Approved in 2019, Act 60 consolidated over 30 separate tax incentive programs into one streamlined framework. The goal? To boost economic development and make Puerto Rico one of the most attractive places in the world for both business operations and personal wealth management.
Key objectives of Act 60 include:
- Attract investment and promote economic development.
- Simplify tax incentive processes to make them more accessible.
- Strengthen Puerto Rico’s global competitiveness as a business hub.
- Encourage growth in key sectors like technology, green energy, and manufacturing.
Key Financial Benefits of Act 60-2019
4% Fixed Income Tax Rate for Export Services
One of the biggest advantages for businesses is the 4% fixed income tax rate for export services provided to clients outside Puerto Rico. Eligible industries include:
- Consulting
- Software development
- E-commerce
- Marketing and advertising
- Research and development (R&D)
This tax rate is dramatically lower than the U.S. mainland’s corporate tax rates, which can reach up to 21% or more depending on federal and state obligations.
100% Capital Gains Tax Exemption
If you’re an investor, trader, or involved in cryptocurrency, Puerto Rico’s 100% tax exemption on capital gains is a game-changer. Whether you’re trading stocks, real estate, or digital currencies, you can avoid paying capital gains tax on Puerto Rican-sourced income. On the U.S. mainland, these rates can reach 20% or more depending on your tax bracket—making this one of the most lucrative incentives for high-net-worth individuals.
100% Tax Exemption on Dividend and Interest Income
For business owners and investors with significant income from dividends and interest, Act 60 offers a 100% exemption on dividend and interest income. Mainland U.S. residents are typically taxed at rates ranging from 15% to 20% on these passive income streams, making Puerto Rico an ideal location to maximize returns.
Residency Requirements
To fully enjoy Puerto Rico’s tax incentives, individuals must meet specific residency requirements to become bona fide residents. This includes:
- Physical presence: Spending at least 183 days per year on the island.
- Tax home: Establishing your primary home and business operations in Puerto Rico.
- Closer connection: Demonstrating that you have a stronger connection to Puerto Rico than to any other location—this could include obtaining a Puerto Rican driver’s license, opening local bank accounts, and purchasing real estate.
Once you meet these criteria, the full suite of tax incentives becomes available to you, from the 4% corporate tax rate to 100% exemptions on capital gains and dividend income.
Important Facts About Puerto Rico
Easy Access From the Mainland U.S.
One of Puerto Rico’s greatest advantages is its accessibility. As a U.S. territory, traveling to Puerto Rico is remarkably easy and convenient for U.S. citizens. There are no passport requirements, no customs lines, and no currency exchanges needed—Puerto Rico uses the U.S. dollar, making the transition seamless for travelers and new residents alike.
Direct Flights From Major U.S. Cities
Puerto Rico’s main airport, Luis Muñoz Marín International Airport (SJU), serves as the main gateway to the island and offers direct flights from major U.S. cities, including New York, Miami, Atlanta, Chicago, and Dallas. With flight times averaging just three to five hours from the East Coast, Puerto Rico is closer than many mainland destinations, making it ideal for frequent travelers.
Getting Around Is a Breeze
Once you arrive, getting around Puerto Rico is straightforward. The island’s infrastructure includes modern highways and major car rental services, and its compact size makes it easy to explore. From the bustling capital of San Juan to the beaches of Rincon or the mountains of El Yunque, most destinations are just a short drive away.
Seamless Transition for U.S. Businesses and Residents
For businesses, the ease of relocating or expanding to Puerto Rico is a key selling point. The island’s legal and financial systems operate under U.S. federal laws, and the workforce is largely bilingual, with English widely spoken, especially in business sectors. This makes setting up operations and navigating regulations simpler for U.S.-based companies compared to moving abroad.