Puerto Rico’s Act 60 has long been one of the most attractive tax incentive programs for individuals and businesses seeking relocation opportunities. Originally created to stimulate economic growth, attract investors, and encourage new residents to settle on the island, the program has provided significant benefits such as reduced tax rates and exemptions on passive income. why Act 60 changed 2025, important changes were introduced that are set to reshape the way investors and potential residents view relocation plans to Puerto Rico. These updates aim to balance the continued appeal of Puerto Rico as an investment hub with the need to ensure sustainable growth for the local economy.
Background of Act 60
Act 60, also known as the Puerto Rico Tax Incentives Code, consolidates and modernizes various tax laws designed to attract investors and businesses. The law has been instrumental in drawing high-net-worth individuals, entrepreneurs, and companies to Puerto Rico by offering preferential tax treatment. Among its most appealing features were the exemptions on certain types of passive income, such as dividends, interest, and long-term capital gains, as well as favorable corporate tax rates for qualifying businesses.
Key Updates Introduced in 2025
In 2025, two major updates were announced that directly affect both investors and relocation planning. First, the introduction of a modest tax on passive income for new applicants. Previously, those who qualified under Act 60 could enjoy a 0% tax rate on specific types of investment income once they became residents. Starting in 2026, new applicants will instead be subject to a 4% tax on these income streams. While this change reduces the absolute tax advantage, it still represents a competitive rate compared to many mainland jurisdictions.
The second major update is the extension of the program’s timeline. Originally set to expire in 2035, the incentives under Act 60 have now been extended to 2055. This change provides long-term certainty for both individuals and companies considering a move, allowing them to build strategies and make investments with greater confidence in the program’s future.
Impact on Investors
For investors, these changes create both urgency and opportunity. Those who apply before the end of 2025 can still lock in the original 0% rate on passive income, giving them a significant long-term advantage. However, those who apply from 2026 onward will face the new 4% rate. While slightly higher, the new rate remains attractive and competitive, especially when viewed against U.S. federal tax structures. The extension to 2055 further enhances the program’s appeal, as it ensures decades of stability for those investing or relocating now.
Impact on Relocation Plans
The updates to Act 60 also influence relocation decisions. For individuals considering moving to Puerto Rico, the year 2025 is particularly critical. Acting within this window ensures access to the most favorable tax benefits available under the program. For businesses, the extension of the program’s expiration date provides reassurance that their investments will continue to benefit from preferential treatment over the long term. This stability supports larger-scale projects, real estate investments, and entrepreneurial ventures that require long-term planning.
Why the Changes Were Necessary
The adjustments to Act 60 reflect Puerto Rico’s effort to balance the need for external investment with the importance of contributing to the island’s fiscal stability. By introducing a modest tax for new applicants, the government ensures that incoming residents and investors contribute more directly to the local economy while still offering highly competitive benefits. Extending the program’s timeline provides reassurance to those who may have been hesitant due to uncertainty about the program’s duration.
Conclusion
The changes made to Act 60 in 2025 mark a significant shift for investors and individuals exploring relocation to Puerto Rico. While the introduction of a 4% tax on passive income for new applicants reduces some of the program’s original benefits, it still offers considerable advantages compared to other jurisdictions. More importantly, the extension of the program to 2055 ensures long-term stability and planning opportunities. For those considering relocation, 2025 presents an especially important year to act, as early movers will continue to enjoy the most favorable incentives available. Overall, these updates highlight Puerto Rico’s commitment to maintaining its status as an attractive destination for investment while strengthening its economic foundation.