Puerto Rico's Act 60 Export Services decree is one of the most powerful tax incentives available to U.S. businesses today. A 4% corporate tax rate, 100% exemption on dividends, and zero federal income tax on Puerto Rico-sourced income — all fully legal under the U.S. Internal Revenue Code. But qualifying is not automatic. There are specific requirements, and getting them wrong is expensive.
Here is exactly what you need to know.
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What Is Act 60 Export Services?
Act 60 of 2019 consolidated Puerto Rico's previous incentive framework, including the former Act 20 Export Services Act, into a single statute. The Export Services decree under Act 60 targets businesses that export services from Puerto Rico to clients outside the island.
The core benefits are:
- 4% fixed corporate income tax rate on eligible income
- 100% tax exemption on dividends paid from export services profits
- 100% exemption on municipal and property taxes during the decree term
- Decree term of 20 years, renewable for an additional 10
These benefits apply to Puerto Rico-sourced income only. The structure works because Puerto Rico, as a U.S. territory, sits outside the federal tax system for income earned and kept on the island.
Who Qualifies for Act 60 Export Services?
To qualify, your business must meet three core requirements.
1. You must operate an eligible service business
Act 60 Export Services covers a broad range of service categories including:
- Consulting and professional services
- Technology and software development
- Advertising and public relations
- Research and development
- Legal and financial services
- Call centers and back-office operations
- Cryptocurrency and blockchain services
- Investment management and advisory
Manufacturing and most product-based businesses do not qualify under this decree. Services must be the primary business activity.
2. Your clients must be located outside Puerto Rico
This is the export requirement. The services you provide must be consumed outside the island. If your clients are Puerto Rico residents or businesses, that income does not qualify for the reduced rate. Most mainland U.S. clients, foreign clients, and international businesses satisfy this requirement automatically.
3. Your business must be established in Puerto Rico
You cannot operate from Florida or New York and claim Act 60 benefits. Your business entity must be formed and operating in Puerto Rico. This means a Puerto Rico corporation or LLC, a physical or registered office on the island, and genuine business operations here. The Puerto Rico Department of Economic Development and Commerce takes substance requirements seriously. A shell company with no real activity will not survive an audit.
The Application Process
Qualifying for Act 60 Export Services requires a formal decree from the Puerto Rico government. This is not a tax election you file with the IRS. It is a government-issued contract that locks in your tax rate for the decree term.
The process works as follows:
Step 1: Entity Formation
If you do not already have a Puerto Rico business entity, you need one before applying. A Puerto Rico corporation or LLC is standard. The entity must be in good standing with the Puerto Rico Department of State.
Step 2: Prepare the Application
The application is filed through the Puerto Rico Incentives Portal. It requires detailed information about your business activities, projected revenue, number of jobs to be created, and the specific services you intend to export. Supporting documentation includes financial projections, a business plan, and identification of your target markets.
Step 3: Job Creation Commitment
Act 60 Export Services requires a commitment to create and maintain at least one full-time job in Puerto Rico. For most small and mid-size service businesses this is straightforward. Larger operations may face higher employment thresholds depending on the decree negotiation.
Step 4: Decree Negotiation and Issuance
Once your application is submitted, it goes through review by the Puerto Rico Office of Industrial Tax Exemption. There is a negotiation phase where the specific terms of your decree are confirmed. Once executed, the decree is a binding contract between your business and the Puerto Rico government.
Processing times vary. Plan for 60 to 180 days from submission to executed decree depending on application volume and complexity.
Common Mistakes That Kill Applications
Applying before establishing real operations. The government looks for genuine economic substance. If your application shows a new entity with no employees, no office, and no existing clients, it raises red flags. Build some operational foundation before applying.
Misclassifying ineligible income. Not all revenue your Puerto Rico business generates qualifies for the 4% rate. Income from Puerto Rico clients, passive income, and certain investment returns may be taxed at standard rates. Proper income allocation from day one protects you at audit.
Skipping the Annual Report requirement. Act 60 decree holders must file an annual report with the Office of Industrial Tax Exemption confirming compliance with decree conditions. Missing this filing puts your decree at risk of revocation.
Confusing Export Services with Individual Investors. Act 60 has two major individual components: the Export Services business decree and the Individual Investors decree for capital gains and passive income. These are separate decrees with different requirements. Many applicants conflate them. If you are relocating personally and moving investment assets, you likely need both.
What It Costs
There are government filing fees associated with the application, currently in the range of a few thousand dollars depending on the decree type. Annual report fees apply during the decree term. These are minor relative to the tax savings a properly structured Act 60 business generates.
The bigger cost is professional fees for proper structuring, application preparation, and ongoing compliance. Cutting corners here is a false economy. An improperly structured decree or a compliance failure can result in retroactive tax liability, penalties, and loss of the decree entirely.
Is Act 60 Export Services Right for Your Business?
Act 60 Export Services works best for service businesses generating $200,000 or more in annual revenue, with clients primarily outside Puerto Rico, and an owner willing to establish genuine operational presence on the island. The math becomes compelling quickly at that revenue level and scales significantly as income grows.
It is not a fit for businesses that cannot demonstrate real Puerto Rico operations, businesses serving primarily local clients, or owners who want the tax benefit without the relocation commitment.
Next Steps
If you are evaluating Act 60 Export Services for your business, the first step is a honest assessment of whether your business model and client base qualify. The second is understanding what entity structure and operational setup gives your decree the strongest foundation.
The Puerto Rico Business Law Firm handles Act 60 Export Services applications, decree compliance, and ongoing advisory for businesses operating under active decrees. We also handle blockchain compliance, Act 75 distribution agreements, and commercial litigation for clients across the U.S. and internationally.
Schedule a free evaluation to discuss whether Act 60 Export Services is the right structure for your business.
Christian M. Frank Fas, Esq. is a Puerto Rico licensed attorney with over 25 years of commercial and business law experience. RUA License No. 16,407.