Puerto Rico’s Financial Gem: A First-Hand Look at Act 60

By Edward Roske

DORADO, Puerto Rico — Navigating the global financial landscape can be daunting, but every so often, an opportunity stands out. For me, that was Puerto Rico’s Act 60. As someone who made the leap from The Great State of Texas¹ and relocated to this sun-kissed Caribbean island, I’ve experienced firsthand the allure and intricacies of this unique financial proposition.

Act 60: A Beneficiary’s Perspective

Since its inception in 2020, Act 60 has been a beacon for new residents like myself. The perks are undeniably attractive:

• Total exemption from Puerto Rican income tax on dividends.
• Full relief from Puerto Rican income tax on interest.
• No Puerto Rican income tax on both short-term and long-term capital gains.
• A welcoming zero tax on cryptocurrencies and other crypto assets.

But it’s not just about the financial incentives. Embracing the bona fide residency means genuinely immersing oneself in Puerto Rican life. For me, this wasn’t a hard sell. The island’s vibrant culture, breathtaking landscapes, and warm community have made it a cherished home.

Why Puerto Rico and Why Act 60?

The driving force behind Act 60 was Puerto Rico’s vision for a brighter economic future. By drawing in investors, professionals, and folks like me, they aimed to invigorate the local economy. The influx of diverse skills and backgrounds promises innovation and a boost to local businesses and the real estate market.

Living the Act 60 Life: Considerations and Joys

While I adore my life here and the benefits of Act 60, there are considerations for potential beneficiaries:

1. True Commitment: This isn’t just a financial decision. It’s a life choice. You’re committing to being part of the Puerto Rican community.
2. Economic Balance: From the U.S. mainland’s perspective, there’s the potential for tax revenue loss, as more people like me make the move.
3. Economic Dependency: Over-reliance on such schemes could make Puerto Rico’s economy vulnerable to external shocks if global financial climates shift or if there’s a mass exodus of these new residents.

I’m writing this article while looking out my home office window at the ocean waves cresting beyond the beach, so let’s not forget the joys. For me, waking up every day in paradise, enjoying the vibrant Puerto Rican culture, the rewards of Act 60, beaches galore, and the sense of community make it all worth it.

Navigating Act 60: The How-To Guide for Potential Beneficiaries

Diving into the world of Act 60 is tantalizing, but it’s not a simple plunge. The road to Puerto Rico’s tax benefits is paved with conditions, intricate details, and some essential paperwork.

Earning the Bona Fide Resident Status

To unlock Act 60’s vault of perks, you must first earn the title of a bona fide Puerto Rican resident. This isn’t just a label; it’s a status achieved by passing three IRS tests:

• Presence Test: It’s all about your physical presence. You need to be in Puerto Rico for at least 183 days during the taxable year… essentially. There are some other ways to qualify².
• Tax Home Test: Your primary office, or tax home, must be in Puerto Rico throughout the taxable year.
• Closer Connection Test: Emotionally and socially, your closest connections should be with Puerto Rico, not the U.S. mainland or any other country. Make sure Puerto Rico comes first in your heart.

But Act 60 adds its flavor: To solidify your bona fide status, you’re required to purchase property in Puerto Rico within two years from when you obtain the decree. This isn’t just any property – it must be your primary residence.

Establishing a Tax Basis: The Fine Print

Venturing into Act 60’s financial benefits demands a keen understanding of tax bases, especially when it comes to capital gains.

• Publicly Traded Securities: If you’re dealing with these, mark your move date. On this day, take a snapshot of your asset’s price. This becomes the foundation for future calculations.
• Privately Held Business Interests: Here, the ball’s in your court. As an investor, you’ll set the valuation and split the gain based on the days the asset was held in different locations.

A Look Back: For Former Puerto Rican Residents

If Puerto Rico’s shores once called you home, there’s an added layer to consider. While Act 22 initially set a 15-year absence requirement, it was shortened to six years in 2017. However, Act 60 has now extended this to a decade as of the date of Act 60’s passage, making it essential to have lived outside Puerto Rico since at least January 1, 2010 to qualify for Act 60.

Stepping into the Act 60 Arena

If you’re ready to embrace the Act 60 journey, start by submitting an application to Puerto Rico’s Office of Industrial Tax Exemption (OITE). If all goes well, you’ll receive a tax exemption decree valid for 15 years that can be renewed for another 15. But this journey isn’t free. It comes with its set of fees, including application charges, yearly donations, and compliance filing costs.

To give you an idea of timeline, I moved to Puerto Rico in March 2023, applied immediately for my Act 60 individual decree, and received it in October 2023. While my approval took about six months, my wife received hers in only four months. The critical date is your move date, though, so sit back and be patient while the OITE does their due diligence.

While the allure of Act 60 is undeniable, it demands diligence, commitment, and a thorough understanding of its intricacies. But for those willing to navigate its course, the rewards can be substantial.

The Road Ahead for Act 60 Beneficiaries

For those under Act 60’s umbrella, the horizon looks bright. Since your decree is valid for 15-30 years, the benefits seem secure against any immediate changes in Puerto Rico’s tax framework. Yet, the global financial atmosphere is dynamic. Beneficiaries should remain vigilant, tracking shifts both in the U.S. and Puerto Rico, to ensure their strategy remains robust.

Conclusion

Act 60 isn’t just a financial incentive; it’s an invitation to a new life. As a beneficiary, I can vouch for the myriad of opportunities and experiences it offers. If you’re considering moving down here, Act 60 should not be your primary motivation: you should want to live on an island in the Caribbean. While the financial benefits are significant, the true wealth lies in the island’s beauty and the vibrant spirit of its people.

1. Per my editor, “Texas” must always be referred to in print as “The Great State of Texas.” He says it’s basically a law. ↩︎
2. There is an excellent article on the other ways to pass each of the three tests at RelocatePuertoRico.com. ↩︎