Act 60: The Benefits of Puerto Rico’s Law 20 and 22 for New Residents

If you’re considering a move to Puerto Rico, Act 60 might be the incentive you’ve been looking for. This law, which consolidates earlier laws 20 and 22, offers significant tax benefits to individuals and businesses who relocate to the island. The attractive incentives have drawn attention from investors, entrepreneurs, and high-net-worth individuals from the U.S. and beyond. Here’s how you can take advantage of these tax benefits and why Palmas del Mar could be your ideal destination.

What is Act 60?

Act 60, also known as the Puerto Rico Incentives Code, was introduced in 2019 to simplify and unify a variety of tax incentives that the government previously offered under several laws. The most famous of these were Law 20 (Export Services Act) and Law 22 (Individual Investors Act), which are now incorporated into Act 60.

The purpose of these laws is to stimulate economic growth in Puerto Rico by attracting foreign investors and high-net-worth individuals to live and do business on the island. In exchange for their relocation, Puerto Rico offers very favorable tax conditions that are hard to find anywhere else in the U.S.

How Act 60 Benefits Individuals (Formerly Law 22)

If you are a U.S. citizen, one of the biggest draws of Puerto Rico under Act 60 is the Individual Resident Investor Incentive (formerly Law 22). This incentive allows you to enjoy zero capital gains tax, zero taxes on dividends, and zero taxes on interest income—an almost unheard-of deal in the U.S.

Here are some of the primary tax benefits you can expect:

• 0% tax on capital gains: All capital gains accrued after you become a bona fide resident of Puerto Rico are completely tax-free.
• 0% tax on dividends and interest income: This means you can receive dividends from investments or interest from accounts without paying federal or local taxes.
• 4% corporate tax: If you own a business that exports services from Puerto Rico to clients abroad (under the provisions of Law 20), your income is taxed at a flat rate of just 4%.

How to Qualify for Act 60’s Tax Benefits

Relocating to Puerto Rico and qualifying for Act 60 tax benefits involves meeting certain criteria to prove you are a bona fide resident. Here’s what you need to do:

1. Establish Residency: You must live in Puerto Rico for at least 183 days out of the year. You can’t have a “tax home” elsewhere, meaning your primary financial and personal ties need to be to Puerto Rico.
2. Relocate Your Primary Home: You’ll need to purchase or rent a residence in Puerto Rico to show that you intend to make the island your primary home.
3. File for Act 60 Decree: Apply for and be granted the Act 60 tax decree through the Puerto Rico government. This decree locks in your tax benefits for a specific period, typically 15-20 years.
4. Engage in Community Contribution: As part of the recent updates to Act 60, beneficiaries must now make an annual donation of $10,000 to Puerto Rican nonprofits. This requirement helps ensure that new residents are contributing to the local community and economy.

Palmas del Mar: The Ideal Community for Act 60 Beneficiaries

One of the most appealing places for new residents relocating under Act 60 is Palmas del Mar in Humacao. This gated community on Puerto Rico’s east coast offers a luxurious lifestyle with numerous amenities, making it a prime choice for individuals looking to maximize both their tax benefits and quality of life.

Here’s why Palmas del Mar could be the perfect fit for you:

• Luxury Homes and Condos: Palmas del Mar offers a wide range of high-end properties, from beachfront condos to spacious single-family homes, perfect for creating your new home base in Puerto Rico.
• World-Class Amenities: The community boasts two championship golf courses, a marina, tennis courts, horseback riding trails, restaurants, and even a private school—ideal for families relocating to the island.

• Business-Friendly Environment: Many residents who relocate to Palmas del Mar under Act 60 are successful entrepreneurs and investors, creating a natural network of potential business partners, mentors, and collaborators. This allows for ample opportunity to do business among residents and leverage the tax benefits of the island.
• Safety and Privacy: As a gated community, Palmas del Mar provides a high level of security and privacy, which is especially appealing to high-net-worth individuals and families.
• Access to San Juan: While Palmas del Mar offers a peaceful, resort-like atmosphere, it’s still only about an hour’s drive from the vibrant capital of San Juan, making it easy to access the city’s business, dining, and cultural scene.

Why Now is the Time to Move

With ongoing discussions about U.S. tax reform, there’s no guarantee that Puerto Rico’s Act 60 tax benefits will remain as favorable in the future. The earlier you move and lock in your tax decree, the longer you can enjoy the incredible benefits Puerto Rico offers. Given the potential for capital gains tax hikes in the U.S., there’s never been a better time to consider making the move.

Key Takeaways

If you are an investor, entrepreneur, or high-net-worth individual looking for a tax-efficient place to live, Puerto Rico’s Act 60 offers unparalleled benefits. With zero tax on capital gains and dividends, a low 4% corporate tax rate for export services, and an affordable cost of living, relocating to Puerto Rico can significantly improve your financial outlook.

In addition, communities like Palmas del Mar provide a perfect environment to enjoy a high standard of living, safety, and luxury, making it easier to transition into life on the island. If you’ve been considering a move to Puerto Rico, Act 60 could be your ticket to both financial savings and a new tropical lifestyle.

Are you ready to explore real estate options in Palmas del Mar? Contact us today for more information on available properties and how you can make the most of Puerto Rico’s Act 60 tax incentives. If you need guidance on finding the right professionals to help you apply for the incentives, we can assist you in connecting with the right experts.