Act 60 after Act 38-2026: 0% vs 4% and the Dec 31, 2026 deadline
Last reviewed 2026-10-21. General information only, not tax or legal advice.
On March 10, 2026, Puerto Rico enacted Act 38-2026, which amends the Individual Resident Investor (IRI) program in the Puerto Rico Incentives Code (Act 60-2019). On April 24, 2026, the Office of Incentives for Businesses (OIN) at the Department of Economic Development and Commerce (DDEC) issued Informative Bulletin DDEC 2026-004 explaining how it applies the changes. This guide summarizes both, together with the Kevane Grant Thornton tax alert of March 20, 2026.
The short version
- Filed by Dec 31, 2026 (11:59 PM, by portal filing-fee timestamp): treated as a request for the 0% rate on net capital gains, interest and dividends. The decree expires Dec 31, 2035, and the pre-Act 38 residence-purchase rules apply, whenever the decree is approved.
- Filed on or after Jan 1, 2027: 4% on interest and dividends, 4% on post-residency long-term gains, and 5% on pre-residency appreciation recognized after 10 years of residency. The program now runs to Dec 31, 2055.
- Existing Act 60 / Act 22 decrees: grandfathered unless revoked, valid through Dec 31, 2035, and may be renegotiated under the new rules.
Side by side
| Item | Before Act 38-2026 / filed by Dec 31, 2026 | Filed on or after Jan 1, 2027 |
|---|---|---|
| Program sunset | Dec 31, 2035 | Dec 31, 2055 |
| Interest & dividends | 0% | 4% |
| LT gains: appreciation after residency | 0% | 4% |
| LT gains: appreciation before residency, recognized after 10 years of residency | 5% | 5% |
| Prior-residency test | No PR residency Jan 17, 2006 – Jan 17, 2012 | No PR residency in the 6 years before moving |
| Primary residence | Buy a home from an unrelated person and use it as your primary residence | Same, but it must be owned directly (or jointly with a spouse) or through a qualifying trust. Entity ownership such as an LLC is not allowed. |
Sources: Kevane Grant Thornton; DDEC Bulletin 2026-004. Per Grant Thornton, the new rates apply unless a more favorable rate applies under Act 60, the PR Internal Revenue Code or other law.
What this means in practice
If you are seriously considering a move and the 0% regime matters to you, the binding date is the filing of the application, not its approval. The DDEC bulletin says applications filed before January 1, 2027 keep the substantive benefits in effect at filing, regardless of when the decree is approved. Rushing a weak application can still be costly. The program also requires genuine bona fide residency, which the IRS reviews.
The new regime has two advantages: the longer 2055 term and more certainty. Some people may choose it on purpose, and the bulletin describes how a pending applicant can ask to be evaluated under it.
Being a good neighbor
Act 60 is a contested topic in Puerto Rico. Many residents feel the incentives raise housing costs and treat newcomers differently from locals. Anyone moving should know that history, learn some Spanish, and take part in local life and business rather than just the tax benefits.
FAQ
What is the deadline to keep the 0% rate?
Under DDEC Informative Bulletin 2026-004, the Office of Incentives treats Individual Resident Investor applications received by December 31, 2026 at 11:59 PM as requests for the 0% rate on net capital gains, interest and dividends. The filing time is the Incentives Portal's filing-fee timestamp. Those decrees expire December 31, 2035.
What rates apply to applications filed on or after January 1, 2027?
Per Kevane Grant Thornton's summary of Act 38-2026: 4% on interest and dividends, 4% on long-term gains from appreciation after residency, and 5% on long-term gains from appreciation before residency that are recognized after 10 years of residency. The program now runs through December 31, 2055.
I already have an Act 60 or Act 22 decree. Does this change it?
Existing decrees are grandfathered unless revoked and stay valid through December 31, 2035. They may be renegotiated to adopt the new rules now or later, per the Grant Thornton alert.
What is the new prior-residency rule?
For applications filed on or after January 1, 2027, you must not have been a Puerto Rico resident in the 6 years before moving. The old test asked about residency between January 17, 2006 and January 17, 2012.
Can my home be owned by an LLC?
For applications under the new rules, the primary residence must be owned directly by the individual, jointly with a spouse, or through a qualifying trust, not through an entity like an LLC. The DDEC bulletin says applications filed before January 1, 2027 keep the residence rules in effect before Act 38-2026.
Can a pending application switch to the 4% regime?
Yes. The DDEC bulletin explains how an applicant with a pending application can ask to be evaluated under the 4% rate and the 2055 term. Because the details depend on the application, confirm the steps with the Office of Incentives or a professional.
Does Act 60 remove US federal tax?
No. Act 60 is a Puerto Rico incentive. Federal treatment of Puerto Rico-source income for bona fide residents falls under the US Internal Revenue Code (Section 933), and a US citizen remains subject to federal tax on other income. Get professional advice.
Primary sources
- DDEC Informative Bulletin 2026-004 (Apr 24, 2026)
- Act 38-2026 text (Spanish)
- Kevane Grant Thornton tax alert (Mar 20, 2026)
General information, not tax or legal advice. Rules and agency interpretations change. Confirm with the DDEC Office of Incentives or a licensed Puerto Rico professional.