Act 60 in 2026: What Changes If You Apply After December 31

If you are considering moving to Puerto Rico under the Individual Resident Investor program under Act 60, there is a date you need marked in red: December 31, 2026.

What happens before or after that day determines whether you pay 0% or 4% tax on the interest, dividends, and capital gains covered by the decree. That is not a minor difference.

This article explains exactly what changed, what stayed the same, and what you should do if you are evaluating an application.

What is the Individual Resident Investor program under Act 60?

Act 60-2019 — known as the Puerto Rico Incentives Code — consolidated a series of incentive laws, including the former Act 22-2012. Under its Individual Resident Investor program, people who relocate to Puerto Rico and meet certain requirements can obtain a tax decree that allows preferential rates on certain types of income generated after establishing residence on the island.

Historically that decree eliminated tax on those items, but it is worth not lumping them together, because the Incentives Code treats them separately:

• Interest and dividends: under Section 2022.01, those derived from all sources — not only Puerto Rico source — after becoming a resident and before January 1, 2036 are fully exempt, including the alternate basic tax.
• Capital gains: under Section 2022.02 the rule splits. Appreciation after establishing residency is exempt if realized before January 1, 2036. Appreciation before residency remains taxable, and its treatment depends on whether it is realized within or after ten years of becoming a resident.

That benefit was the main driver that attracted thousands of investors, entrepreneurs, and high-net-worth individuals to the island over the last decade.

What changed with Act 38-2026

In March 2026, Governor Jenniffer González-Colón signed House Bill 505, which became Act 38-2026. This legislation modifies the Individual Resident Investor program under Act 60 in three main ways:

1. New 4% rate for applicants after December 31, 2026

Anyone who submits a decree application on or after January 1, 2027 will be subject to a preferential tax rate of 4% on interest and dividends and on capital gains generated after becoming a Puerto Rico resident. Appreciation from before the move continues to be governed by its own rules and does not fall under that 4%.

This replaces the previous 0%.

4% remains significantly lower than federal rates applicable to that type of income in any U.S. state. But the difference versus 0% is real.

2. The program is extended until 2055

One positive piece of news from Act 38-2026: the program is extended from its original expiration date in 2035 to December 31, 2055. This provides long-term planning certainty.

Under the new framework, decrees for new applicants starting in 2027 will run through 2055.

3. New prior non-residency requirement

Applicants who submit after December 31, 2026 must show they were not residents of Puerto Rico for at least six years before relocating.

This requirement is intended to ensure the program continues attracting new capital and individuals to the island, not people who already lived here.

Who is NOT affected?

Two groups remain fully protected by the legislation:

Current decree holders — If you already have a decree under Act 60 or under the former Act 22-2012, your benefits do not change. Decrees function as contracts between the investor and the government of Puerto Rico. Your 0% rate remains in effect under the original terms of your decree.

Applicants before December 31, 2026 — If you submit your decree application before December 31, 2026 and it is approved, you keep the 0% structure through December 31, 2035, as established under the original scheme.

The difference between one day and the next

One of the most important features of this change is that it is binary. There is no gradual phase-in.

The difference between filing on December 31, 2026 and January 1, 2027 is not incremental — it is the difference between 0% and 4% on your investment income for years to come.

Because decree approval can take several months, analysts recommend not waiting until the last moment if the intent is to qualify under the current structure.

As noted in the MZLS Law analysis (March 2026): eligibility is determined by the application filing date, not the approval date or the date the applicant establishes physical residence. That has important practical implications.

What do you need to qualify under the current scheme?

To file before December 31, 2026 and keep the 0% benefit, you must:

• Obtain a decree from the Department of Economic Development and Commerce (DDEC)
• Become a bona fide resident of Puerto Rico — generally meaning at least 183 days per year on the island, establishing your main home here, and demonstrating a closer connection to Puerto Rico than to any state
• Acquire residential property in Puerto Rico within the first two years of your decree
• Make an annual charitable donation of $10,000 to nonprofit organizations in Puerto Rico, half of which must go to entities focused on eradicating child poverty, per the approved list
• Comply with the Annual Exempt Business Report. For tax year 2025 it is filed with the DDEC within 30 days of filing your return, including extensions, or by November 15, 2026. For tax years beginning after December 31, 2025, it moves to electronic filing with Hacienda as part of the return, with the corresponding fees

The application process is filed with DDEC and requires detailed documentation of your financial situation and residence history.

Implications for business owners in Puerto Rico

If you already own a business in Puerto Rico operating under an export services decree (Act 60 — services) and are considering also applying for the Individual Resident Investor benefit as an individual, this window applies to you too.

The 4% corporate rate for export services businesses under Act 60 does not change with this legislation. The change applies specifically to the individual component of capital gains, interest, and dividends.

For clients with Act 60 obligations who need to coordinate annual compliance — reports, documentation, returns — the complexity of these changes makes having an organized process from the start of the tax year even more critical.

Three questions you should ask yourself now

Are you evaluating relocating to Puerto Rico under Act 60? If the answer is yes and you have significant investment income, the analysis of whether to file before December 31, 2026 or after January 2027 is worth doing now, not in November.

Do you already have a decree and need to coordinate your 2026 compliance? Decree holders have specific annual compliance obligations. An organized process is the difference between keeping decree benefits and losing them.

Do you have a business under Act 60 and have never organized your compliance? Lack of documentation and follow-through is the main reason valid decrees get complicated with agencies. The annual review is not optional — it is part of what keeps your decree in good standing.

An important note

The information in this article is general in nature and is based on Act 38-2026 and analysis available as of May 2026. Tax laws are complex and each individual situation may have factors that change the analysis. Before making decisions based on these benefits, we recommend working with an accounting or tax professional experienced in compliance with Hacienda PR and the IRS.

If you want to evaluate your Act 60 compliance situation or need to organize your annual tax obligations, you can request an initial evaluation with no commitment.