Act 60 has three main purposes reduce tax rates, give tax credits and provide cash grants. Act 60 consolidates and simplifies Puerto Rico’s various economic and tax incentives to attract investment and promote economic development across multiple sectors, including manufacturing, tourism, exportation of services, agriculture, creative industries, private equity, international financial institutions, infrastructure, and renewable energy. Additionally, it incentivices individuals such as individual resident investors, researchers, difficult to recruit people and young entrepreneurs.
Act 60 decree is a contract between the company, the owners and the government. The benefits provided under Act 60 decree are constitutionally protected. This means that even if the government changes or repeals Act 60, businesses that have signed decrees will retain their benefits as long as they comply with the terms (including filing the annual report, maintain employees and revenue levels). While this constitutional protection ensures that rights cannot be diminished for decree holders, beneficiaries may seek better terms. Act 60 allows decree holders to request amendments when new laws or regulations offer more favorable terms, but approval from both the Secretary of the Department of Economic Development and Commerce (DDEC) and the Secretary of Treasury is required.
Eligible entities include local and international businesses, startups, and individuals involved in sectors such as manufacturing, R&D, export services, creative industries, agriculture, tourism, and renewable energy. Act 60 also extends benefits to professionals, investors, and industries new to Puerto Rico.
Act 60 offers several incentives depending on the applicable chapter, including:
Act 60 supports a variety of sectors, including manufacturing, tourism, software development, R&D, renewable energy, agriculture, and export services. It also has provisions for industries like blockchain and creative sectors (film, music, and art).
Act 60 provides specific benefits to individual entrepreneurs, including young entrepreneurs (ages 16-35), professionals of difficult recruitment, researchers and scientist, and residents moving to Puerto Rico to invest.
In general, businesses can benefit from Act 60 for up to 15 years. Startups and small businesses (PYMES) may receive more tailored benefits for 5 years. Young entrepreneurs decree receive incentives such as a 0% tax rate for up to three years or until they reach $500,000 in net income.
Applicants need to register their business, provide details regarding the business including forecast for revenue, financing, facilities, and employees, compliance certifications, and why it qualifies for an Act 60 decree, and submit required documents through DDEC’s incentives portal (online platform). Depending on the type of project application, especially those involving tourism, infrastructure, or a historic zone, may require additional plans, documents, and permits. Once approved, businesses must comply with reporting and operational requirements, such as submitting annual reports and meeting employee or investment benchmarks.
The terms and conditions of each decree vary depending on the industry and business profile. Companies can negotiate specific terms, such as employee requirements, required revenue or investment levels.
Decrees are binding contracts between the business, its owners, and the government. The owners are responsible for compliance. In certain situations, such as a change in control, businesses must notify the DDEC. However, some transfers, like inheritances, are exempt from notification.
| Tax Type | Code of Incentives Rates/Incentives | Regular Rates Partnership/Corporation |
| Income Tax | 1-10.5% rate | Up to 33%/up to 37.5% |
| Dividends | 100% exempt | 0%/15% |
| VOB Tax | 50-100% exempt | 0.02%-0.05% |
| Real & Personal Property Tax | 75-100% exempt | 5.80%-10.33% (Personal) 8.03%-12.33% (Real) |
| Royalties | 0-12% rate | Sections 1091.01- 1092.01 PRIRC |
| Excise Taxes and SUT | 100% exempt on raw materials, m&e, and other used for the mfg, tourism process, green energy and agriculture. Not applicable to Chapters | 4-11.5%, among others |
The timeline can vary, but typically it takes between several months for simpler decrees to years to complete the application process and obtain an Act 60 decree. However, you can in some cases take the tax position of having the incentives since filing. It depends on the complexity of the case and the responsiveness of the DDEC.
Compliance involves annual reporting and adherence to the conditions outlined in the decree. Costs include legal and accounting fees for compliance and maintaining eligibility.
Ready to explore the possibilities with Act 60? Schedule a consultation today to discuss your specific needs and how we can help you take advantage of these lucrative tax incentives. Email us at info@izquierdolawllc.com or book a free consultation today.
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