Act 38-2026 (“Act”) was enacted into law, amending several provisions of Act No. 60 of 2019, as amended, known as the Puerto Rico Incentives Code (“Act 60”), applicable to tax benefits granted in a Decree of Tax Exemption (“Decree”) under the resident individual investors program (“Program”). The Act aims to update eligibility rules, preferential tax rates, and extend the 2036 sunset of the benefits to 2055.
Below is a summary of the changes, provided that these changes are mainly applicable to any tax incentives application (“Application”) filed on or after 01/01/2027, unless otherwise stated.
Changes to Act 60
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BEFORE
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NOW
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COMMENTS OR HIGHLIGHTS
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New sunset on Program benefits
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12/31/2035
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12/31/2055
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One of the most important changes introduced by the Act, the extension is automatic for Applications filed on or after 01/01/2027. |
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New residency eligibility rules
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No Puerto Rico residency between 01/17/2006 and 01/17/2012.
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No Puerto Rico residency in the 6 years before moving to Puerto Rico.
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This change is intended to ensure that the Program continues to target new capital and new residents. |
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Changes to preferential tax rates
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The new tax rate regime applies for Applications filed on or after 01/01/2027, unless a more favorable tax rate applies under Act 60, the Puerto Rico Internal Revenue Code, or any other applicable law. |
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Changes to primary residence requirement
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Purchase from an unrelated person, a real estate property that is used as primary residence.
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Same rule, except that the primary residence must be owned directly by the individual or through a trust.
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This change significantly impacts tax planning alternatives for individuals under the Program by not allowing ownership of the primary residence through a legal entity, such as a limited liability company.
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What happens to filed Applications or existing Decrees?
- Applications filed before the enactment of the Act that have not yet being approved may request the Office of Incentives for Businesses in Puerto Rico to be evaluated under the new rules.
- Existing Decrees under Act 60, or its predecessor law Act No. 22 of 2012, as amended (“Act 22”), are grandfathered unless the Decree is revoked.
- Decrees under Act 60 or Act 22 will remain valid through 12/31/2035, unless revoked, and may be renegotiated to enjoy the new rules now or at a later date.
Final remarks
The Act reflects Puerto Rico’s effort to keep its incentives framework aligned with the Island’s current economic reality while preserving its competitiveness. These amendments demonstrate the government’s intention to continue attracting future resident individual investors by providing certainty, preferential tax treatment, and long-term stability through 2055.
Careful tax planning remains essential for individuals considering relocating to Puerto Rico to benefit from the available tax incentives. Likewise, existing Decree Holders should evaluate their options and carefully consider any elections that may become available once their current benefits expire.
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Clifford Cólon-Casiano Clifford has served legal entities, individuals, and business clients in various industries, providing services for written tax consultations regarding possible tax treatments, tax scenarios and forecasts, advice on business setting in Puerto Rico, and drafting memorandums, letters, Sworn Statements, Closing Agreements, Tax Rulings, among others.View Profile
