If you run a service-based business and serve clients outside Puerto Rico, Act 60 Export Services could dramatically reduce your tax burden.
We’re talking about a 4% corporate income tax rate — legally structured, government-approved, and available to qualifying businesses that relocate operations to Puerto Rico.
But this isn’t a shortcut. It’s a relocation and structuring strategy.
Let’s break it down clearly.
What Is Act 60 Export Services?
Puerto Rico Act 60 is Puerto Rico’s Incentives Code, enacted in 2019. It consolidated previous tax laws, including former Act 20 (Export Services) and Act 22 (Individual Investors).
The Export Services Incentive under Act 60 offers:
4% corporate income tax rate
100% tax exemption on dividends from the Act 60 company (Puerto Rico level)
Possible municipal tax reductions
Long-term tax decree protection
It’s designed to attract service-based businesses to operate from Puerto Rico while selling to clients abroad.
Who Qualifies for Act 60 Export Services?
To qualify, your business must:
Provide eligible services
Export those services outside Puerto Rico
Operate from Puerto Rico
Meet substance and compliance requirements
Let’s unpack that.
Eligible Services Under Act 60
Common qualifying industries include:
Consulting
Software development
SaaS businesses
Digital marketing
Investment advisory
Financial services
Engineering services
Certain crypto and blockchain services
The key rule: Your clients must be outside Puerto Rico.
If you sell primarily to Puerto Rico customers, you won’t qualify.
The 4% Corporate Tax Rate Explained
Once approved, your Puerto Rico entity may pay:
4% corporate income tax on eligible export income
That’s significantly lower than typical U.S. federal and state combined rates.
Dividends distributed from the Act 60 company to Puerto Rico resident shareholders are generally exempt from Puerto Rico tax.
However:
U.S.-sourced income remains federally taxable.
Federal filing obligations still apply.
Substance Requirements: The Critical Factor
Puerto Rico requires real economic presence.
This typically includes:
Forming a Puerto Rico LLC or corporation
Maintaining a physical office in Puerto Rico
Hiring at least one Puerto Rico-based employee (usually required)
Opening local bank accounts
Conducting management decisions from Puerto Rico
Shell companies without substance are high-risk.
Substance is everything.
Owner Residency Requirements
If you want to personally benefit from Puerto Rico’s broader tax advantages, you must become a bona fide Puerto Rico resident.
This means passing three federal tests:
1. Physical Presence Test
At least 183 days per year in Puerto Rico.
2. Tax Home Test
Your principal place of business must be on the island.
3. Closer Connection Test
Your stronger personal and economic ties must be to Puerto Rico.
Without residency, you may still operate the company, but personal federal tax exposure may remain high.
Application Process for Act 60 Export Services
The process generally includes:
Forming a Puerto Rico entity
Submitting an application to the Puerto Rico Department of Economic Development
Receiving an official tax decree
Registering with Puerto Rico Treasury
Paying required application and annual fees
The tax benefits typically apply after the decree is approved.
Annual Compliance Requirements
To maintain benefits, you must:
File Puerto Rico corporate tax returns
Submit annual compliance reports
Maintain employee requirements
Keep active operations on the island
Pay annual fees
Failure to comply can result in revocation.
Charitable Contribution Requirement
Most Act 60 decree holders must make an annual charitable donation to Puerto Rico-based nonprofit organizations.
This supports the local economy and community.
How Long Do Act 60 Export Services Benefits Last?
Approved tax decrees generally remain valid through 2035 (depending on issuance date), provided compliance is maintained.
This long-term certainty is one of the program’s biggest advantages.
Pros of Act 60 Export Services
4% corporate income tax
Dividend exemptions at Puerto Rico level
Long-term tax stability
Retain U.S. citizenship
No offshore banking complexity
Cons and Considerations
Must relocate operations
Requires local employee(s)
Ongoing compliance costs
IRS scrutiny of residency claims
Relocation commitment
This is not a remote tax trick.
It’s a business relocation strategy.
Is Act 60 Export Services Worth It in 2026?
For:
Consultants earning high service income
SaaS founders
Marketing agencies
Financial advisory firms
Crypto service providers
Remote-first businesses willing to relocate
Yes — when structured properly.
For businesses unwilling to move real operations?
No.
Puerto Rico rewards commitment.
Example Scenario
Imagine a consulting business earning $1 million in net income.
Mainland U.S. combined federal and state tax might exceed 30–40%.
Under Act 60:
Corporate tax could be 4% on eligible export income.
That difference can be substantial — but only if compliance is perfect.
Final Thoughts
Act 60 Export Services offers one of the most aggressive — yet fully legal — corporate tax incentives available to U.S. entrepreneurs.
But it requires:
Real relocation
Real substance
Real compliance
This is not about avoiding taxes.
It’s about changing tax jurisdiction — properly.
When executed correctly, Act 60 can significantly reduce corporate tax exposure while remaining within U.S. law.
FAQs
1. Can I run the company remotely from the mainland U.S.?
No. The business must operate from Puerto Rico to qualify.
2. Do I personally need to move to Puerto Rico?
Not necessarily for the company to qualify, but personal residency is required to maximize individual tax benefits.
3. Does the 4% rate apply to all income?
Only eligible export services income qualifies.
4. How many employees are required?
Typically at least one Puerto Rico-based employee, though requirements may vary based on structure.
5. Is Act 60 audited by the IRS?
The IRS may scrutinize residency and sourcing claims. Proper documentation is essential.
