Puerto Rico · Business & founder
Act 60 Export Services Decree
Open. Formerly Act 20-2012. 4% corporate rate on net income from the exempt operation.
Pairs with the Chapter 2 decree: the operating company pays 4%, and distributions to a bona fide resident owner come out exempt. For a genuinely relocated consultant, fund manager or software business serving non-Puerto Rico clients, the combined effective rate is close to 4% — which is the real Act 60 proposition, far more than the 0% headline on passive income.
Qualifying routes
No minimum investment. 4% corporate rate on exempt-operation net income; 100% exemption on distributions to the owner. Services must be rendered to persons outside Puerto Rico with NO Puerto Rico nexus. At least 80% of gross income must come from the export activity. Decree term 15 years, renewable +15.
The facts
- Total landed cost
- Filing and annual compliance fees plus professional costs — typically USD 15,000–40,000 in year one, and materially more where the structure is examined. There is no minimum capital requirement.
- Timeline
- 2–6 months — DDEC processing
- Physical presence
- The company must operate from Puerto Rico and services must be physically performed there. The owner's own bona fide residence is governed separately by the Chapter 2 / §937 tests.
- Family
- n/a — this is a business decree, not a personal status
- Permanent residency
- n/a
- Citizenship
- n/a
- Language test
- n/a
- Dual citizenship
- Permitted
- Requirements
- services rendered to persons outside Puerto Rico with no Puerto Rico nexusat least 80% of gross income from the export activityone full-time Puerto Rico-resident employee if business volume exceeds USD 3m (may be the owner); none belowbona fide Puerto Rico establishment and performance of servicesannual reporting to DDEC
- The employee requirement is the most-misreported item in this space. Where business volume exceeds USD 3m, ONE full-time Puerto Rico-resident employee is required — and it can be the owner. At or below USD 3m, there is NO employee requirement at all. This is far softer than commonly advertised, which is precisely why it draws scrutiny: a one-person 'export services' company invoicing US clients from a laptop is the archetypal audit target.
- The 'no Puerto Rico nexus' test is what both the IRS and DDEC attack. Holland & Knight confirms the IRS demands documentation that services were ACTUALLY PERFORMED in Puerto Rico, not conducted remotely from US financial centres.
- Related-party transactions and transfer pricing require arm's-length documentation. Routing US-sourced service revenue through a Puerto Rico entity without substance is the exact pattern under examination.
- A Puerto Rico corporation is a FOREIGN corporation for US federal purposes, triggering Form 5471 and potentially Subpart F/GILTI for the US-person owner.
- The reported 2% rate for the first five years where business volume is under USD 3m is single-sourced and unverified. The property tax exemption is variously reported at 60% and 75%. Confirm both with Puerto Rico counsel.
- The decree is worthless unless the owner independently satisfies the three bona fide residence tests — see the Chapter 2 entry.