Understanding Puerto Rico’s Act 60 Tax Changes
Starting January 1, 2026, new participants in Puerto Rico’s Act 60 program will face a 4% flat tax on local dividends, interest, and capital gains, replacing the previous 0% rate. The update also includes new potential capital gains exemptions on primary home sales and aligned IRA deduction limits.
Understanding Puerto Rico’s Act 60 Tax Changes
Puerto Rico has updated its popular Act 60 program, officially ending the era of the 0% tax rate for new individual investors. Under the reformed rules, new participants who apply after December 31, 2025, are subject to a 4% flat tax on dividends, interest, and capital gains sourced within the island. While this marks a significant shift from the previous total exemption, the program remains highly competitive compared to U.S. federal rates, which can exceed 23% for high earners.
Existing decree holders who secured their status before the 2026 cutoff are grandfathered into the original 0% rate. The program has also been extended through 2055, providing long-term certainty for those willing to make the island their permanent home.
Who is affected
These changes primarily impact high-net-worth expats and digital nomads seeking to optimize passive income. To qualify for the 4% rate, you must become a bona fide resident, meaning you spend at least 183 days per year on the island and pass the "closer connections" test.
Short-term travelers and tourists are unaffected by these changes. Additionally, remote business owners operating under the Export Services category still enjoy a separate 4% corporate tax rate, which remains unchanged by these specific investor reforms.
What to do
If you are planning a move to take advantage of these visa updates, keep the following requirements in mind:
- Real Estate: You must purchase a primary residence in Puerto Rico within two years of receiving your decree.
- Charitable Giving: Annual mandatory donations to local nonprofits have increased to $15,000.
- Banking: You are required to maintain a local bank account and submit annual reports via a new compliance portal.
- Residency History: You cannot have been a resident of Puerto Rico at any point during the six years prior to your application.
The application process is handled through the DDEC. Given the increased IRS scrutiny on residency status, most applicants now work with a certified CPA to ensure their annual filings and presence tests are airtight.
Read our full Puerto Rico guide for the complete picture.