Ever wondered how some businesses pay just a fraction of the taxes others do? Well, Puerto Rico’s Act 60 Export Services program is one of those golden tickets. Designed to attract global businesses, it allows entrepreneurs and companies to benefit from ridiculously low tax rates while boosting Puerto Rico’s economy.
History of Puerto Rico’s Tax Incentives
Before Act 60 came into the spotlight, Puerto Rico introduced Act 20 (Export Services) and Act 22 (Individual Investors). Both were created to attract outside talent and investment. Eventually, these programs merged under Act 60, which streamlined and updated the incentives, making it easier for businesses and individuals to take advantage.
Understanding Act 60 Export Services
So, what does Act 60 actually cover? In simple terms, it offers tax breaks to companies in Puerto Rico that export services outside the island. The key requirement is that your services must be delivered to clients or markets outside Puerto Rico.
Key Benefits of Act 60 Export Services
Let’s talk perks. If you qualify:
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4% corporate tax rate instead of the U.S. average of 21%.
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100% exemption on dividends from earnings.
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Potential tax savings on personal income, especially for investors.
That’s huge, right? Imagine keeping more of your profits while growing globally.
Eligible Export Services
Not all services qualify, but the list is pretty broad. Eligible activities include:
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Business and management consulting
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Marketing, public relations, and advertising
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Software development and IT solutions
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Accounting, legal, and financial services
Basically, if your service can be delivered online or remotely, chances are you qualify.
How to Qualify for Act 60 Export Services
Qualifying isn’t rocket science, but it does require attention to detail. You need to:
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Establish a Puerto Rican entity (corporation or LLC).
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Provide services exclusively to clients outside Puerto Rico.
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Comply with residency requirements (at least for individuals).
Application Process
Here’s the play-by-play:
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Register your business in Puerto Rico.
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File an application with the Puerto Rico Department of Economic Development and Commerce (DDEC).
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Submit required documents (business plan, financials, etc.).
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Wait for approval and sign your tax grant agreement.
Corporate Tax Advantages
The crown jewel is the 4% fixed corporate tax rate. Compare that to the U.S. mainland where businesses pay 21% federally plus state taxes, and you see why entrepreneurs are flocking to Puerto Rico.
Individual Tax Advantages
If you qualify under Act 60’s investor provisions, you may also enjoy exemptions on capital gains, dividends, and interest income. That’s music to an investor’s ears.
Case Studies
Take tech startups, for example. Many have relocated to Puerto Rico, drastically reducing tax liability while tapping into a skilled bilingual workforce. Consulting firms, digital agencies, and even hedge funds have seen tremendous benefits.
Potential Challenges
Of course, it’s not all sunshine. Some challenges include:
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Navigating compliance rules
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Relocation expenses
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Misunderstanding eligibility (services must be exported, not local)
Best Practices for Compliance
Want to stay in good standing? Stick to these tips:
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Keep thorough financial and operational records
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Meet annual reporting requirements
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Hire at least one local employee (if applicable)
Act 60 vs. Other Tax Incentive Programs
Unlike offshore tax havens, Puerto Rico is a U.S. jurisdiction. This means businesses benefit from lower taxes without dealing with the stigma or legal headaches that come with operating in traditional tax havens.
Impact on Puerto Rico’s Economy
The program has helped attract billions in capital, boosted the island’s service economy, and created thousands of jobs. While critics raise concerns about gentrification, the economic boost is undeniable.
Future of Act 60
The law continues to evolve, and some reforms are on the horizon. The Puerto Rican government is committed to keeping the program attractive while addressing local concerns.
Conclusion
Act 60 Export Services is more than just a tax break—it’s a bridge between global business and Puerto Rico’s economic revival. For entrepreneurs, consultants, and investors, it’s an opportunity to grow wealth while contributing to an island that’s reinventing itself.
FAQs
1. Can individuals apply for Act 60 without a company?
Yes, but most people benefit through a corporate structure to maximize tax savings.
2. How long does it take to get approved?
Usually between 3–6 months, depending on documentation and government processing times.
3. What industries benefit most?
Consulting, finance, IT, and marketing are top winners.
4. Are there residency obligations?
For individuals under investor rules, yes. For companies, residency isn’t required, but the entity must be based in Puerto Rico.
5. Is Act 60 permanent?
No law is truly permanent, but Puerto Rico has shown commitment to maintaining this program for long-term growth.