Puerto Rico

No. And this undoes the most common reason people want Act 60 in the first place. Under IRC §937(b) and Treas. Reg. §1.937-2, gain on property you owned before establishing Puerto Rico residency counts as US-source income if you sell within 10 years of the move. That means it is not excludable under IRC §933, so it remains fully taxable at the federal level. The idea that you can move to San Juan, sell USD 50m of unrealised gain, and pay 0% is simply false. Every dollar of gain that accrued before you became a bona fide resident is US-source and federally taxable. Filing as though it were not is not an aggressive position. It is a criminal fact pattern. Puerto Rico's own 5% rate on pre-residency long-term gains is just that, a Puerto Rico rate. It cannot override US federal tax treatment. These are two separate taxing authorities.

It is open, but it was fundamentally reformed by Act 38-2026, signed in March 2026 by Governor Jenniffer González-Colón. Critically, Act 38-2026 still awaits final endorsement by the Financial Oversight and Management Board (FOMB) under PROMESA. That endorsement remained unconfirmed as at July 2026. So the 2055 extension is not yet final. Under PROMESA, the Board can block legislation that runs against the fiscal plan, and a bill that cuts future revenue by extending exemptions is exactly the kind of measure it scrutinizes closely. Verify the position at the date of any advice.

The countdown-clock marketing gets the real analysis backwards. Applications filed on or before 31 December 2026 get 0% on interest, dividends and post-residency capital gains, but only through 31 December 2035, just over nine years away. Applications filed from 1 January 2027 get 4% running to 31 December 2055, twenty-nine years out. So the real question is not whether to choose 0% or 4%. It is whether nine years at 0% beats twenty-nine years at 4%. For a young client, or one whose liquidity event is a decade off, the 2027 regime is plausibly the better deal. Filing before the deadline does preserve the option to elect into the new regime later, but the mechanics and deadline for that election are not yet publicly documented, and they depend on FOMB.

This is not simply the 183-day rule. Bona fide residence under IRC §937(a) and Treas. Reg. §1.937-1 requires three cumulative tests applied every year: a presence test, a tax home test, and a closer connection test. The presence test is satisfied by any one of several alternatives, including 183 days in Puerto Rico, or no more than 90 days in the US, or no significant connection to the US. But the tax home test requires that you not have a tax home outside Puerto Rico during any part of the year. And the closer connection test has no day count at all. It weighs your permanent home, family location, belongings, memberships, voter registration and driver's licence. Each test is independently fatal.

Both, and they catch different clients. The tax home test kills the client who moves to San Juan but keeps running the business from a New York office he still visits. His tax home never left New York. The closer connection test is subjective and lifestyle-based, with no bright line, which is exactly why the IRS likes it. A client who does the 183 days but keeps the Aspen house, the kids in Greenwich and the California ties will lose. Presence-test alternative (v), no significant connection to the US, fails automatically if you have a US permanent home, US voter registration, or a spouse or minor children whose principal abode is in the US.

Yes, and the enforcement shift is happening right now. GAO-26-107225, issued 8 December 2025, found that the IRS lacked complete beneficiary data for over four years and ignored 179 DDEC referrals. Still, the IRS agreed to all three recommendations. Hacienda data-sharing has been operational since April 2025, and the IRS has identified roughly 100 high-income individuals for potential criminal investigation. DOJ charged Suresh Gajwani in March 2025 with evading tax on USD 80 million by falsely claiming Act 22 eligibility. The IRS Puerto Rico Act 22 Campaign, added on 29 January 2021, remains active. Promoters, including accountants, attorneys and advisers, are targets too. Failing to file Form 8898, which is required when worldwide gross income is USD 75,000 or more in the transition year, keeps the statute of limitations open indefinitely.

No. US federal estate and gift tax applies in full to a US citizen living in Puerto Rico. Act 60 does nothing for estate tax, and for UHNW families this often outweighs whatever income tax is saved. You remain a US person. Subpart F, GILTI and PFIC all still apply. A Puerto Rico corporation counts as a foreign corporation for US federal purposes, which pulls in Forms 5471, 926, 3520, 8938 and FBAR. Self-employment tax still applies to Puerto Rico-source earnings of USD 400 or more. Act 60 is a carve-out inside the US tax system, not an exit from it. Moving triggers no exit tax, but §877A expatriation tax applies in full if you later renounce US citizenship.

The Chapter 3 Export Services decree works alongside the Chapter 2 individual decree. The operating company pays a 4% corporate rate on exempt-operation net income. Distributions to a bona fide resident owner come out exempt. So a consultant, fund manager or software business that has genuinely relocated, and serves clients outside Puerto Rico, can reach a combined effective rate near 4%. The employee requirement is the part most people get wrong. Where business volume exceeds USD 3m, one full-time Puerto Rico-resident employee is required, and that employee can be the owner. At or below USD 3m, there is no employee requirement at all. That softness is exactly why a one-person export services company invoicing US clients from a laptop is the classic audit target. The IRS demands documentation that the services were actually performed in Puerto Rico, not remotely from US financial centres.

No. The benefit flows entirely from IRC §933, which excludes Puerto Rico-source income from US federal gross income for a bona fide resident. It is available only to US citizens and green-card holders. For a non-US person, Act 60 offers nothing they could not get better elsewhere. It confers no immigration status whatsoever. Puerto Rico is the United States for immigration purposes, and there is no Puerto Rican citizenship or passport. It is a tax decree, not a migration route.