If you’ve been hearing about Puerto Rico’s tax incentives, you’ve probably come across Act 60. This law has become a magnet for entrepreneurs, investors, and companies looking to cut tax burdens while expanding their global reach. One of its most attractive features is the Export Services Incentive, designed to encourage businesses to set up shop in Puerto Rico and serve clients outside the island.
What is Act 60?
Act 60, also known as the Puerto Rico Incentives Code, consolidates previous tax incentives like Act 20 (Export Services) and Act 22 (Individual Investors Act). Its main goal is simple: attract businesses and individuals to Puerto Rico to stimulate the local economy.
How Export Services Fit into the Program
Under Act 60, businesses that export services from Puerto Rico to clients outside the island can enjoy massive tax breaks. It’s a win-win: companies save on taxes, and Puerto Rico benefits from job creation and economic activity.
Understanding Puerto Rico’s Act 60
The Evolution from Act 20 and Act 22
Originally, Act 20 focused on businesses offering services abroad, while Act 22 incentivized individual investors. Act 60 merged them for simplicity and efficiency.
Purpose of the Legislation
Puerto Rico’s economy has long needed diversification. Act 60 attracts professionals, investors, and companies to build sustainable industries on the island.
Who Qualifies for the Export Services Incentive?
Any business that provides eligible services to non-resident clients can apply, provided they operate physically in Puerto Rico and meet compliance requirements.
Key Benefits of Act 60 Export Services
Corporate Tax Rate Reduction – Qualified businesses pay a fixed 4% corporate tax rate instead of the much higher U.S. federal rates.
100% Exemption on Dividends – Distributions from profits are tax-free for Puerto Rico residents.
Incentives for Service Providers – From consulting to software development, service-oriented businesses gain the most.
Eligible Export Services Under Act 60
Professional and Consulting Services – Lawyers, accountants, architects, and business consultants.
Creative and Marketing Services – Advertising, design, content creation, and public relations.
Financial and Investment Advisory – Fund managers, investment firms, and financial planners.
Technology and Software Development – IT services, app developers, and SaaS providers.
Shared Services and Support Centers – HR, payroll, and customer service centers.
Requirements for Businesses
Physical Presence in Puerto Rico
You must establish an office or commercial presence on the island.
Hiring Local Employees
Companies are required to employ Puerto Rican residents, which helps boost the economy.
Compliance and Reporting Obligations
Regular filings, reports, and audits ensure transparency and adherence to the program.
How Act 60 Supports Business Growth
Attracting International Clients – Puerto Rico’s location and bilingual workforce make it a natural hub for global business.
Expanding Global Operations – Lower taxes mean more capital for growth and expansion.
Leveraging Tax Incentives for Profitability – Savings go straight back into scaling operations.
Setting Up Under Act 60 Export Services
Incorporation in Puerto Rico – Register your business with the Department of State.
Application for Tax Decree – Submit documents to the Puerto Rico Department of Economic Development and Commerce (DDEC).
Ongoing Compliance and Renewal – Meet annual requirements to maintain benefits.
Challenges and Considerations
Adapting to Puerto Rico’s Market – Cultural and logistical adjustments may be necessary.
Meeting Employment and Compliance Requirements – Businesses must be prepared to commit resources locally.
Long-Term Sustainability – Tax incentives depend on political and economic stability.
Act 60 vs. Other Jurisdictions
Comparison with U.S. Mainland Taxation
Mainland corporations often face combined tax rates exceeding 21%, while Act 60 businesses enjoy a flat 4%.
Comparison with Offshore Tax Havens
Unlike some tax havens, Puerto Rico offers legitimacy with direct ties to the U.S. legal and banking systems.
The Future of Act 60 Export Services
Puerto Rico’s incentives continue to attract entrepreneurs, especially in tech, finance, and creative industries. With globalization and digital business models, Act 60 is positioned to remain a powerful tool for growth—though businesses must stay alert to potential legislative changes.
Conclusion
Act 60 Export Services provide one of the most attractive tax structures in the world for service-based businesses. By setting up in Puerto Rico, entrepreneurs gain access to reduced tax rates, 100% tax-free dividends, and a skilled workforce, all while contributing to the island’s economic revitalization. For anyone serious about scaling globally while cutting tax liabilities, Act 60 is an opportunity worth exploring.
FAQs
1. What types of services qualify under Act 60?
Consulting, marketing, finance, tech development, and shared services are common examples.
2. Do businesses need to hire Puerto Rican employees?
Yes, local hiring is a core requirement to ensure Act 60 benefits the island.
3. How long does the Act 60 decree last?
Typically, tax decrees are granted for 15 years, with potential extensions.
4. Can individuals also benefit from Act 60?
Yes, Act 60 also includes incentives for individual investors who relocate to Puerto Rico.
5. Is Act 60 still a good option for startups?
Absolutely. Startups can take advantage of the low corporate tax rate to reinvest in growth.