David Act 38-2026 signed March 10, 2026, fundamentally restructured Puerto Rico’s Act 60 program effective January 1, 2027. The key change: the 0% capital gains rate is gone for new applicants. Here’s what changed, what stayed the same, and what it means.
The December 31, 2026, Cutoff
Applications filed by December 31, 2026, are grandfathered: 0% tax on capital gains, dividends, and interest through 2035. Applications filed January 1, 2027, onward are subject to new rates. The application filing date is what matters, not your relocation date or decree approval date. This distinction drove a surge in applications before year-end 2026.
Capital Gains Tax: 0% Becomes 4%
The primary change: new applicants face 4% Puerto Rico tax on capital gains, dividends, and interest (post-residency). On a $10 million gain, that’s $400,000 in taxes versus zero previously. Federal taxes apply separately. Compared to mainland rates (roughly 24% federal plus state), 4% is still competitive, but the economics changed.
Pre-residency capital gains face 5% if sold after 10 years. The bona fide residency requirement (183 days per year, permanent housing) remains unchanged.
Existing decree holders keep their 0% rates through their decree term (typically 2035). Act 38-2026 only modifies new applications, not existing decrees.
Individual Income Tax: Unchanged at 0%
Remote workers and service providers earning Puerto Rico-source income still face 0% tax under Act 60. Your income must originate in Puerto Rico—you can’t work remotely for a mainland company and claim Act 60 benefits. For remote workers and entrepreneurs building island-based businesses, Act 38-2026 didn’t change the game.
Export Services and Business Programs: Unchanged
Export services businesses still operate at 4% corporate tax with 100% dividend exemption. Manufacturing and tourism programs remain intact. Act 38-2026 didn’t disrupt business incentives.
Tightened Eligibility Requirements for New Applicants
Non-residency lookback: Must show six years (down from ten) of non-residency before relocating. Easier to meet.
Primary residence: Home must be owned directly or through a trust you control. No corporate ownership allowed.
Documentation: Certified CPA letters and annual tax authority reporting required (reflects IRS scrutiny).
Charitable contributions: Increased annual giving to Puerto Rico nonprofits required.
Program Extended Through 2055
Act 60 now runs through 2055 (previously 2035), providing 28 years of planning visibility for new applicants. Existing decree holders remain protected through 2035 under current terms. The extension signals Puerto Rico’s long-term commitment to Act 60 as economic policy.
Who Benefits Under the New Regime
Remote workers: 0% income tax unchanged. Still compelling for earning $200,000+ annually in Puerto Rico-source income.
Business owners: 4% corporate rate and dividend exemption unchanged. No disruption to export services incentives.
Investment income earners: The 0% to 4% shift changes the math. A $50 million sale now produces $2 million in PR taxes versus zero. Still competitive with mainland rates (~24% federal plus state), but casual benefit-seeking becomes less compelling.
Real estate investors: Property requirements slightly tighter but still achievable.
What This Means for Your Situation
Are you earning Puerto Rico-source income as a remote worker? Act 60 remains compelling at 0%.
Are you establishing export services? Your 4% corporate rate is unchanged.
Are you a capital gains investor planning to relocate and sell? The 4% rate (not 0%) changes the math. Does it still make sense versus mainland rates? That depends on your specific situation, tax burden, and genuine relocation commitment.
The honest answer: Act 60 still works for certain moves, but the 0% headline is gone. The 4% reality requires real commitment to Puerto Rico.
Existing Decree Holders: Protected
If approved before January 1, 2027, your 0% rate stays through your decree term (typically 2035). Act 60 decrees are binding contracts; the government cannot modify them retroactively. This protection drove the end-of-2026 application surge.
Why Puerto Rico Made These Changes
IRS scrutiny increased in 2025. Puerto Rico tightened requirements to address bona fide residency issues in some cases. The 4% rate generates revenue while staying competitive. The extension through 2055 maintains Act 60 as economic policy while responding to federal oversight concerns.
Is Act 60 Still Worth It?
Act 60 still provides tax advantages for certain moves. The 4% capital gains rate is lower than mainland (~24% federal plus state) but significantly higher than the 0% offered before 2027. The program evolved from headline-grabbing zero percent to competitive but modest four percent.
Do your own analysis based on your mainland tax burden, actual business plans, and genuine relocation commitment. Then decide if Act 60 makes sense for you.
What Hasn’t Changed
Act 60 remains legal, real, and used by thousands. The program requires genuine relocation and commitment. Documentation, compliance, and audits matter. Puerto Rico extended Act 60 through 2055 to show long-term commitment. The program is not disappearing. What changed is capital gains rates. Everything else remains intact or strengthened.
Next Steps If You’re Serious
Consult a Puerto Rico tax professional. They can evaluate your income, capital gains profile, and business plans, then model actual tax savings for you.
Verify eligibility. The six-year lookback, property ownership, and documentation standards have real teeth.
Plan the timeline. Residency establishment, property purchase, decree filing, and approval take months.
Understand compliance. Annual charitable contributions, 183-day residency documentation, CPA certification, and tax reporting require ongoing attention.
Act 60 works for people relocating to Puerto Rico and optimizing taxes in the process. It doesn’t work as a pure tax strategy disconnected from genuine relocation.
The Bottom Line
Act 38-2026 made Act 60 more complex and more restrictive for new applicants. The capital gains rate dropped from 0% to 4%. Eligibility requirements tightened. Documentation demands increased. The program extended through 2055.
For remote workers, export services business owners, and serious investors with large transactions, Act 60 still makes sense. The economics are different, but they still work.
For casual benefit-seekers or anyone hoping to access Act 60 without genuine Puerto Rico commitment, the 2027 changes made that significantly harder.
If you’re considering Puerto Rico for business, investment, or relocation purposes, Act 60 remains one of the island’s most significant economic policy tools. Just understand that the program you’re looking at now is different from the 0% capital gains program that made headlines in 2025 and early 2026.
Do your research. Consult professionals. Decide based on your actual situation, not on headlines or enthusiasm. Act 60 works if you’re moving to Puerto Rico. Otherwise, it doesn’t.
