By Maria Isabel Santiago, Esq.
Act 60 is inseparable from the tax incentive framework that has shaped Puerto Rico’s luxury market for the better part of a decade. I work at the intersection of these two worlds daily as both a corporate attorney and a licensed real estate broker.
Read on for information, advice, and guidelines (but not specific legal or tax advice).
Key Takeaways
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Act 60 is Puerto Rico's Incentives Code, enacted 2019: It consolidated Act 22 (Individual Investors) and Act 20 (Export Services) into a single framework, extended through 2055 by Act 38-2026
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Individual Investor decree holders are required to buy real estate in Puerto Rico: Purchasing a primary residence within two years of obtaining the decree is mandatory, not optional
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The 0% capital gains rate applies only to post-residency gains: Gains on assets purchased before moving remain subject to US federal tax - timing matters enormously
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IRS enforcement increased significantly in 2025 and 2026: Compliance is not optional
What Act 60 Is and Why It Attracts Real Estate Buyers
Act 60 is Puerto Rico's tax incentive code, enacted July 1, 2019, and extended through 2055 by Act 38-2026 in March 2026.
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Chapter 2 - Individual Investors: The chapter most relevant to Act 60 Puerto Rico real estate buyers. Qualifying bona fide residents are eligible for full exemption on Puerto Rico-source dividends, interest, and post-residency capital gains - 0% for applicants before the January 2027 deadline, 4% for new applicants. Under IRC Section 933, qualifying residents exclude PR-source income from US federal tax.
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Chapter 3 - Export Services: Businesses performing services in Puerto Rico for outside-island clients qualify for a 4% corporate tax rate, full dividend exemption, and significant property and municipal license tax reductions.
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The program extends through 2055: Act 38-2026 gives planning certainty for decades. Existing decree holders retain their current benefit terms regardless of rate changes for new applicants.
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Decrees are legally binding contracts: Each decree is a 15-year contract with the Puerto Rico government. The terms guaranteed in the decree govern the holder's tax treatment for that period.
Act 60 restructures Puerto Rico-sourced income treatment in ways that require genuine residency and planning.
The Real Estate Purchase Requirement
For individual investors, buying property in Puerto Rico is a legal compliance obligation.
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Two-year purchase requirement: Decree holders must acquire Puerto Rico real estate as a primary residence within two years of obtaining the decree (changed from three years under recent amendments).
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Primary residence and registry recording: The property must function as the primary residence throughout the decree term. For post-2026 applicants, ownership must be recorded or pending in the Puerto Rico Property Registry, making a clean title chain and timely filing critical.
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Capital gains and pre-residency assets: Gains on assets purchased before establishing bona fide residency generally remain subject to US federal tax. Only appreciation accrued after residency is established qualifies for exemption. Selling appreciated mainland real estate before versus after moving has dramatically different tax consequences.
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The real estate transaction must be legally sound: A purchase with title defects, CRIM issues, or unresolved permits jeopardizes the compliance record. The acquisition must be executed correctly from the notario process through Registry recording.
The property purchase requirement creates a mandatory link between Act 60 and the Puerto Rico real estate market.
How Act 60 Shapes Real Estate Values and Market Dynamics
The impact of Act 60 Puerto Rico real estate demand is most visible in the luxury communities that have become primary hubs for decree holders.
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Dorado has become the anchor market: Dorado and Dorado Beach are the most concentrated Act 60 resident community in Puerto Rico. Gated luxury communities, Ritz-Carlton Resort infrastructure, and a community of like-minded entrepreneurs have made it the default address for many decree holders, driving prices to among the highest on the island.
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Condado and San Juan luxury: Condado and Miramar attract decree holders who prefer an urban setting. Walkable luxury, proximity to professional services, and an established international community produce consistent Act 60-motivated demand.
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The property purchase creates a price floor: Decree holders are legally required to purchase and maintain a primary residence. Compliance motivation produces consistent demand even when the broader market softens.
The Act 60 buyer profile is central to understanding how Puerto Rico's luxury communities price and trade.
Compliance, Enforcement, and Why Getting It Right Matters
The benefits of Act 60 are real, but so is the compliance burden, and both have grown significantly.
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Bona fide residency is genuinely required: The IRS applies a three-part test: 183+ days per year in Puerto Rico, a principal tax home in Puerto Rico, and a closer connection to Puerto Rico than to any other jurisdiction.
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Enhanced compliance requirements in 2026: The new portal requires certified CPA letters, proof of residency, and a breakdown of eligible income sources. Crypto holders must declare wallet addresses and transaction histories.
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The January 2027 deadline is meaningful: Applications filed before January 1, 2027 lock in the 0% rate on Puerto Rico-sourced capital gains, dividends, and interest. Applications after that date face the 4% rate. On substantial passive income, the difference compounds to significant money.
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The real estate acquisition is part of the compliance record: Title clarity, Registry filing, CRIM registration, and proper deed execution become documentation the decree holder must maintain and produce if audited.
The key takeaway is that Act 60 rewards careful execution.
FAQs
Does the property I buy for Act 60 compliance need to be in a specific location?
There are no geographic restrictions as to which property satisfies the primary residence requirement; a Condado apartment, Dorado home, or Rincon residence can all qualify. What matters is that the property is recorded in the Property Registry, functions as the primary residence, and is maintained throughout the decree term.
Can I rent out my Act 60 primary residence while I am away?
This requires a specific answer from a tax attorney familiar with your decree terms. A property used as a primary residence with occasional rental activity may be treated differently from a property that functions primarily as a rental. Rental activity suggesting the property is not truly your primary residence creates compliance exposure.
What is the most important thing to do before beginning the Act 60 application process?
Engage a Puerto Rico tax attorney and CPA before taking any steps, including selling assets, establishing residency, or purchasing property. Selling appreciated assets before becoming a bona fide resident means those gains remain subject to US federal tax.
Ready to Navigate Act 60 and Puerto Rico Real Estate Together?
I work with Act 60 decree applicants and holders across San Juan, Dorado, and throughout Puerto Rico as both a licensed real estate broker and a corporate attorney.
Reach out to me, Maria Isabel Santiago, Esq., for a conversation on your real estate goals and how we'll get there.
Reach out to me, Maria Isabel Santiago, Esq., for a conversation on your real estate goals and how we'll get there.
