For Americans seeking to reduce their federal tax burden without renouncing citizenship, Act 60 remains the most powerful domestic tool available.
Puerto Rico's Act 60 (formerly Acts 20 and 22) offers US citizens a legal framework to dramatically reduce their tax obligations by establishing bona fide residency on the island. The headline incentives include a 4% corporate tax rate on export services, 0% capital gains on assets acquired after establishing residency, and 0% tax on dividends from Act 60 businesses.
The Financial Case
For an entrepreneur earning $2M annually in export service income, the difference between California's combined federal and state rate (approximately 50%) and Puerto Rico's Act 60 rate (4% plus a modest annual donation requirement) represents savings exceeding $900,000 per year. Over a decade, that compounds to transformative wealth preservation.
However, the calculus requires honest assessment. Bona fide residency means spending a minimum of 183 days per year in Puerto Rico, establishing a primary home, and genuinely relocating your life. The IRS scrutinizes Act 60 beneficiaries closely. This is not a paper exercise; it demands commitment.
Who It Serves Best
Act 60 is optimal for entrepreneurs and investors with location-independent income, tolerance for the Caribbean lifestyle, and a genuine willingness to relocate. It pairs particularly well with a Caribbean CBI passport for additional optionality, and with careful estate planning for generational wealth transfer.