Act 60 Tourism Incentives Puerto Rico, Explained for Entrepreneurs Who Actually Build Things

Farm-to-table breakfast on a hillside deck overlooking the mountains of Puerto Rico
Puerto Rico’s Act 60 Tourism Chapter isn’t just for major hotel chains. It’s a powerful tax framework built for the entire visitor economy, from mountain glamping to nautical charters.

When Mateo first walked his family’s acreage in the mountains of Utuado, he didn’t see just a coffee farm. He saw a destination. He envisioned luxury tents above the clouds, farm-to-table dining, and guided agrotourism tours: a business built around the land he already owned. What he didn’t immediately see was the legal and financial framework that would make it bankable.

Like most Puerto Rican entrepreneurs, Mateo initially dismissed Act 60’s Tourism Chapter as something for billion-dollar hotel chains, not a startup in the cordillera. He also thought maybe he could turn to short-term rentals. The turning point came when he sat down with me and realized Puerto Rico’s Act 60 tourism incentives weren’t written just for the Ritz and there is a better way to do tourism in Puerto Rico than with AirBnB. Act 60 was written for the visitor economy, i.e. businesses that support tourism (from locals and foreigners). Every business that contributes to why people visit Puerto Rico, and spend money while they’re here, has a seat at this table.

What Actually Qualifies as “Tourist Activity”

On the lodging side, the qualifying designations are broader than most entrepreneurs expect. Traditional hotels and condohotels qualify with a minimum of fifteen units, a front desk, and employment requirements.  Posadas Puertorriqueñas and Guest Houses operations with seven or more units. Bed and breakfasts (minimum three rooms, resident owner, breakfast required). For those building in the agricultural space, agro-lodging, which refers to accommodations with three rooms integrated into a property operated by a bona fide farmer with a tourism incentive extension, is also an eligible designation. Glamping operations with seven or more units qualify, as do tourist villas, defined as a minimum of seven separate units. Hostels with twelve or more beds and one room, round out the lodging side.

The experience side is equally broad. Nautical tourism operations such as vessel charters and jet ski rentals qualify, as do tourist marinas. Agrotourism tours on bona fide agricultural land, theme parks, golf courses operated by or associated with a qualifying hotel, casinos operated within a qualifying tourism project, and medical tourism facilities serving patients traveling from around the globe are all eligible as well.

And if a project doesn’t fit neatly into any of those categories, there is a catch-all provision under Section 5(i): the Secretary of DDEC has discretionary power to qualify facilities or activities that significantly stimulate the visitor economy.

Also, important to note that lenders and property owners that rent their property to tourism developers can also benefit from incentives.

  • Hotels
  • Condohotel
  • Bed and breakfast
  • Posada
  • Guest House
  • Touristic Villa
  • Agrotourism
  • Paradores
  • Vacation Club
  • Glamping
  • Golf course
  • Nautical Tourism
  • Tourism Marina
  • Medical Tourism
  • 15 year contract
  • 4% Income Tax
  • 0% Distributions
  • 75% exemption on real and personal property taxes (CRIM)
  • 50% exemption on municipal taxes (patente)
  • 100% exemption on SUT
  • 100%
  • 4% capital gains
  • 12% royalties

The Decree: Your Tax Environment, Contractually Guaranteed

Accessing Act 60’s benefits requires obtaining a tax exemption decree, a formal binding contract with the Government of Puerto Rico protected by the constitution. A decree typically runs 15 years with the option to renew for an additional 15. For a startup navigating unpredictable early revenue, that kind of stability is itself a strategic asset.

Under the Tourism Chapter, a qualifying business enjoys a 4% fixed income tax rate on eligible tourism income. For businesses with annual revenue under $3 million in their first year, the PYME (Small and Medium Business) designation reduces that rate to 2% for the first five years, a meaningful advantage during the period when cash flow is most constrained.

The income tax rate is only part of the picture. The decree also provides a 100% exemption on dividends, meaning profits distributed to the owner are not taxed at the individual level. For overhead, the law offers a 75% exemption on real and personal property taxes (CRIM) and a 50% exemption on municipal taxes (patente). For operations under construction, the 100% sales and use tax and excise tax exemption on qualifying goods, services, and 75% exemption on construction materials can represent a significant reduction in build-out costs.

Tourism: Non-Dilutive Capital for the Build 

Tax Credits

While the decree protects what you earn, Tourism Investment Tax Credits help fund the project itself. Think of these as government-issued certificates with a specific dollar value tied to your qualifying investment: non-dilutive capital that doesn’t require giving up equity. 

Under Act 60, entrepreneurs choose between two credit structures based on their cash flow needs. 

  • The 30% Tax Credit Option is front-loaded and favored by projects with significant upfront construction costs. An initial 10% of the credit is released upon obtaining financing, with the remaining 20% distributed in three parts starting at the anniversary of the first guest’s arrival.  
  • The 40% Tax Credit Option offers a larger total credit but is back-loaded: the entire 40% is distributed across three equal installments beginning only after that first anniversary of the commencement of operations and first guest stay. 

Choosing between them is a function of when the project needs capital most. Larger projects or those that the construction may take years will often prefer the 30% structure for its earlier liquidity. A project with lower construction costs but higher operational ramp-up may find the 40% structure more advantageous over time. 

Three Ways to Turn Credits into Cash 

Sophisticated operators do not wait for a tax liability to monetize these certificates. There are three primary paths. 

The most straightforward is direct offset: applying the credit against the business’s own Puerto Rico income tax liability, dollar for dollar.  

Alternatively, the tax credits can be sold on the secondary market to a third-party taxpayer for cash, which is the most common route. Conservative underwriting typically assumes 90 to 92 cents on the dollar, though peak demand around tax season has driven secondary market pricing as high as 94 to 95 cents.  

For those who prefer not to find a buyer, the Puerto Rico Treasury offers a buying option, a direct reimbursement at 90% of the credit’s face value. 

Tourism Projects are perfect for Lenders 

For lenders, tourism tax credits also represent another form of collateral established by law. Act 60 requires that tourism developers use their tax credits to repay outstanding debt before using the funds for other purposes. This functions as a structural guarantee for lenders.  

Combined with the fact that interest income earned by banks financing qualifying tourism projects is exempt from Puerto Rico income taxes at a 0% rate, the result is a borrower with a natural advantage. Lenders’ effective return on a qualifying tourism loan is higher than on a comparable non-exempt loan. Any entrepreneur who understands this walks into that banking conversation with more leverage than they may realize. 

Strategy Over Bureaucracy

For entrepreneurs and investors operating in Puerto Rico’s visitor economy, the shift in mindset is this: stop treating legal and tax structure as a bureaucratic hurdle and start treating it as the foundation of your competitive strategy. Act 60 is not a loophole.  

It is a government-sanctioned framework designed to keep capital in the hands of those building the visitor economy, helping operators survive the early years, attract bank financing, and retain more of their revenue as they scale. However, you must find your sherpa to navigate the framework as a single misstep could cost you potential benefits. 

Whether the project is a boutique glamping lodge in the mountains of Utuado, a nautical charter in Fajardo, a guest house in Isabela, or a medical treatment facility in San Juan, the incentives are there. The question is whether the business has been structured to use them. 

Understand your options, and get the structure right from the beginning. 

Izquierdo Law LLC advises entrepreneurs and investors on Puerto Rico tax incentives, Act 60 qualification, and business structuring. Contact us to discuss your project. 

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