General information only, not tax or legal advice. No outcome is promised.

Existing decree holders: switch to 4% through 2055, or stay at 0% to 2035?

Act 38-2026 changed the Individual Resident Investor program for new applications, and it also created a choice for people who already have — or who already requested — a decree. This page explains the trade-off in plain language. It is educational. It is not a recommendation to switch or to stay, and the better path depends on facts this site cannot know.

What the two paths are

• Stay on the current 0% decree. Per Kevane Grant Thornton and DDEC Bulletin 2026-004, existing Act 60 and Act 22 decrees are generally grandfathered unless revoked and remain valid through December 31, 2035. Under that regime, eligible interest, dividends, and post-residency long-term gains are taxed at 0% at the Puerto Rico level for the remaining term. When the decree expires, the 0% rate does not automatically continue.
• Modify the decree to adopt the new regime. DLA Piper’s March 12, 2026 alert states that Act 38 allows Individual Resident Investors who obtained or requested a decree before December 31, 2026 to modify their existing decrees to adopt the new tax regime. Grant Thornton similarly says existing decrees may be renegotiated to use the new rules now or at a later date. Under that regime, the Puerto Rico rate on those same items is generally 4%, and the program term runs through December 31, 2055.

A 5% Puerto Rico rate on certain long-term gains from appreciation before residency, recognized after 10 years of residency, appears under both regimes. The term of that rule follows the decree (through 2035 or through 2055). Act 60 does not, by itself, remove U.S. federal tax.

Factors to weigh — not a scorecard

None of these points decides the question on its own. They are the kinds of issues a licensed professional would usually walk through with you.

• When you expect to recognize eligible income or gains. If a large share of the income that would be 0% will be recognized by 2035, staying on the current decree keeps that window at 0% at the Puerto Rico level. If you expect substantial eligible income after 2035, the longer 4% term may matter more — but only if you actually modify the decree (now or later) and remain eligible.
• The cost of switching early. Adopting the 4% regime before 2035 means paying 4% in years that would otherwise have been 0% under a grandfathered decree. That is a real trade-off against the longer term.
• Whether you can wait. Grant Thornton notes that a renegotiation may be available now or later. Waiting preserves the 0% years, but you would need to confirm that a later modification is still available, what conditions attach to it, and how the Office of Incentives would apply it to your decree.
• Residency and compliance. Either path still depends on bona fide residency and on the obligations in your decree, including annual reports and, for Individual Resident Investors, the donation and principal-residence rules. A modeling question does not replace those requirements.
• Federal tax and other Puerto Rico tax. This comparison is only about the Puerto Rico rates on the eligible items named above. Federal tax, ordinary Puerto Rico rates on other income, and the 5% pre-residency-gain rule are separate.

A simple way to see the arithmetic, under stated assumptions, is the 0% vs 4% comparison calculator. The calculator does not decide whether you should switch.

What this page does not do

It does not estimate your tax, recommend a choice, or treat a modification as automatic or guaranteed. Agency procedures can change. Confirm the current process with the DDEC Office of Incentives and with a licensed Puerto Rico professional who has your decree and your facts.

Sources

• DDEC Informative Bulletin 2026-004 (April 24, 2026) — how the Office of Incentives applies Act 38-2026 to Individual Resident Investor filings, including the Dec 31, 2026, 11:59 p.m. portal-timestamp rule and the Dec 31, 2035 expiration of 0% decrees.
• DLA Piper, “Individual resident investor tax benefits extended through 2055 with a four-percent tax rate” (March 12, 2026) — 4% rate through Dec 31, 2055 for applications filed after Dec 31, 2026; six-year prior-residency look-back and the requirement to establish Puerto Rico residency by Dec 31, 2055; option for investors who obtained or requested a decree before Dec 31, 2026 to modify an existing decree to adopt the new regime. A JD Supra page republishes the same DLA Piper article.
• Kevane Grant Thornton tax alert (March 20, 2026) — side-by-side rates; existing Act 60 / Act 22 decrees grandfathered unless revoked, valid through Dec 31, 2035, and may be renegotiated to use the new rules now or later.
• Text of Act 38-2026 (Spanish).

General information, not tax or legal advice. Reading this page does not create a professional-client relationship.