Puerto Rico’s Act 60 update 2025 is reshaping the island’s investment landscape—introducing new obligations, extending powerful incentives through 2055, and recalibrating benefits to promote fairness and transparency. Recently approved by the House of Representatives and the Senate, the reform introduces a fixed 4% tax on capital gains, dividends, and interest for new applicants starting in 2026, while preserving the existing 0% rate for those who apply before December 31, 2025.

Because the Senate made several amendments, the legislation has now been sent back to the House for final approval before it can be signed into law. By implementing this modest adjustment and extending the timeline, Puerto Rico sends a clear message: the island is committed to reform, transparency, and long-term stability.

For high-net-worth individuals, entrepreneurs, and family offices, these changes carry significant implications for wealth planning, relocation strategies, and long-term investment structures. In this article, we’ll break down the key updates, explore their broader impact, and highlight the strategic opportunities available to investors navigating Puerto Rico’s evolving fiscal framework.

Understanding Puerto Rico’s Act 60

Originally introduced in 2019, Act 60 consolidated previous incentives under Laws 20 and 22 into one unified framework. This law aims to attract businesses and wealthy individuals to Puerto Rico, offering substantial tax advantages such as a 4% corporate tax rate and previously, a 0% individual rate on capital gains, dividends, and interest.

Now, substantial changes under recent legislative initiatives significantly impact future applicants and broaden the incentives for long-term Puerto Rican residents.

Key Updates in the 2025 Reform

The House Bill A-051 strategically restructures Act 60 by creating two distinct paths for investors, depending on application timing:

1. Applicants Before December 31, 2025

• Investors who submit decree applications on or before this date remain eligible for the current 0% tax rate on Puerto Rico-sourced capital gains, dividends, and interest income.
• This grandfathering clause provides policy stability and ensures that this new framework does not affect existing decree holders, who retain their current benefits.

2. Applicants Starting January 1, 2026

• A new 4% fixed tax rate will apply to passive income—explicitly including capital gains, interest, and dividends—for all acquisitions made after establishing residency in Puerto Rico.
• To qualify, applicants must satisfy a six-year non-residency requirement prior to establishing Puerto Rican residency.

Extended Incentives Timeline

The effectiveness of these incentives is now extended through 2055 (previously set to expire in 2035), providing long-term planning certainty for both current and future decree holders.

Leveling the Playing Field for Local Investors

A complementary measure aims at creating equity between foreign decree holders and long-standing local investors:

Starting in the 2025 tax year, Puerto Rico residents—including individuals, estates, and trusts—can elect a special 4% tax rate. This applies to locally sourced dividends, interest, and long-term capital gains.

This elective rate mirrors benefits previously exclusive to decree holders. It is designed to foster local capital retention, broaden participation in Puerto Rico’s growth, and ensure that incentives support not only newcomers but also the island’s established communities.

Those choosing this special rate will be exempt from alternative minimum tax and certain tax credits, simplifying compliance.

Additional Incentives

Beyond these significant shifts, the new legislative package includes complementary tax simplifications and incentives that benefit various sectors:

• Non-profits: Streamlined exemptions aligning with federal processes.
• Municipal Tax System (IVU): Integration with the digital Unified Internal Revenue System (SURI), simplifying compliance.
• Retirement and Education Savings: Increased deduction limits for IRA contributions (from $5,000 to $7,000). Educational savings (from $500 to $1,000), promoting long-term financial security.
• Inventory Tax Exemptions: Elimination of taxes on prescription medications, enhancing healthcare access and affordability.
• Agriculture: Strengthened and clarified incentives for certified local farmers to bolster agricultural productivity.

Governor González asserts these changes collectively promote transparency, modernity, and equity in Puerto Rico’s fiscal landscape, benefiting local residents, expatriates, and new investors alike.

Economic & Policy Implications

The 2025 reform carries both fiscal and strategic significance for Puerto Rico. Government projections estimate that the new framework could generate $27.8–$60.6 million in additional revenue by 2027, and as much as $270 million by 2037. These revenues build on Act 60’s proven track record: since its inception, the program has granted tax decrees to over 3,000 individuals and businesses, contributing to the creation of more than 75,000 jobs and delivering over $650 million in government revenue, according to the Department of Economic Development and Commerce.

Despite the move from a 0% to a 4% tax rate for future applicants, Puerto Rico remains highly competitive. The island continues to offer substantial advantages, including:

• 100% exemption on Puerto Rico-sourced capital gains for current decree holders.
• 75% exemption on property taxes.
• Reduced Puerto Rico corporate tax rates in certain cases.

Governor Jenniffer González has emphasized that this shift represents an intentional policy recalibration. By modernizing the tax structure, extending incentives through 2055, and aligning with global fiscal norms such as the international minimum corporate tax, the Act 60 update 2025 aims to balance fairness for local residents with continued attractiveness for new investors. The net effect is to reinforce Puerto Rico’s position as a leading jurisdiction for strategic capital while enhancing public confidence in the program’s long-term sustainability.

Investor Perspectives

Reactions to the 2025 Act 60 reform highlight both optimism and debate. Industry leaders such as Robb Rill, founder of the Act 20/22 Society, have expressed support, underscoring the importance of extending benefits to returning Puerto Ricans and ensuring sustainable value creation for the island. The reform is also viewed as a step toward building a modern tax code aligned with investor expectations and fiscal responsibility.

At the same time, critics contend that even a 4% fixed rate remains too low compared to global standards, calling for greater alignment with international tax norms. Puerto Rican officials counter that the balance achieved by this legislation preserves the island’s competitiveness while securing much-needed revenue.

Beyond investor sentiment, the reform also carries a social dimension. By extending similar benefits to long-standing residents through the elective 4% local tax rate, the package democratizes economic opportunities.

Strategic Considerations for Investors

The 2025 reform requires investors to think carefully about timing, structure, and long-term positioning. Key considerations include:

·        Timeliness Matters

Investors who apply before December 31, 2025 can still secure the current 0% tax rate on Puerto Rico-sourced capital gains, dividends, and interest. Acting within this window is critical for those seeking to maximize existing benefits.

·        Clarity for Future Applicants

Starting January 1, 2026, new applicants face a 4% fixed tax on passive income. While higher than the previous 0%, this remains highly competitive compared to global alternatives and offers predictability for strategic planning.

·        Current Decree Holders

Existing Act 60 beneficiaries retain their full exemptions, including the 100% capital gains exemption, ensuring stability for those already established under the program.

·        Family Office and Estate Planning

The extension of Act 60 through 2055 provides long-term certainty—enabling multi-decade planning for trusts, estate strategies, and philanthropic vehicles that require predictable tax frameworks.

Continuity, Change, and Long-Term Opportunity

The Act 60 update 2025 brings both change and continuity. The new 4% fixed tax rate replaces the prior zero-tax treatment, but in exchange delivers greater predictability, alignment with global standards, and an extension of incentives through 2055.

This is a thoughtful recalibration—balancing foreign capital attraction with expanded opportunities for local investors. For high-net-worth individuals, family offices, and entrepreneurs, Act 60 remains a uniquely powerful tool for wealth preservation, business growth, and generational planning.

Navigating Puerto Rico’s updated Act 60 incentives requires clarity and timing. Tiempo Capital’s advisors specialize in tax mitigation strategies that align with evolving legislation. Contact us today to explore how our Act 60 services can help you secure long-term advantages.

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This material is for informational purposes only and does not constitute financial, legal, tax, or investment advice. All opinions, analyses, or strategies discussed are general in nature and may not be appropriate for all individuals or situations. Readers are encouraged to consult their own advisors regarding their specific circumstances. Investments involve risk, including the potential loss of principal, and past performance is not indicative of future results.

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Sources:

El Vocero (June 2025). Senado da paso a impuesto de 4% a nuevos beneficiarios de la Ley 60, taken from https://www.elvocero.com/gobierno/senado-da-paso-a-impuesto-de-4-a-nuevos-beneficiarios-de-la-ley-60/article_880cd9fc-2122-41e1-bb54-4f8311f44cd2.html

El Nuevo Día (June 2025). Senado aprueba impuesto de 4% a nuevos beneficiarios de la Ley 60,taken from https://www.elnuevodia.com/noticias/legislatura/notas/senado-aprueba-impuesto-de-4-a-nuevos-beneficiarios-de-la-ley-60/

El Nuevo Día (April 2025). Aplicarán responsabilidad contributiva de 4% a nuevos beneficiarios de la Ley 60, que se extenderá hasta 2055, taken from https://www.elnuevodia.com/noticias/gobierno/notas/aplicaran-responsabilidad-contributiva-de-4-a-nuevos-beneficiarios-de-la-ley-60-que-se-extendera-hasta-2055/

El Nuevo Día (April 2025). Estas son las 13 medidas que buscan simplificar los procesos contributivos en Puerto Rico, taken from https://www.elnuevodia.com/noticias/gobierno/notas/estas-son-las-13-medidas-contributivas-que-buscan-simplificar-los-procesos-contributivos-en-puerto-rico/

CLB Tax LLC (April 2025). Puerto Rico’s New Incentives Bills: A Strategic Split—And a Push Toward Local Equity, taken from https://www.clbtax.com/post/puerto-rico-s-new-incentives-bills-a-strategic-split-and-a-push-toward-local-equity?utm_source=linkedin&utm_medium=blog.post-promoter&utm_campaign=3876e236-d9ce-43f9-b2a6-2fe089d04662

Primera Hora (April 2025). Jenniffer González presenta la primera parte de la reforma contributiva, taken from https://www.primerahora.com/noticias/gobierno-politica/notas/jenniffer-gonzalez-presenta-la-primera-parte-de-la-reforma-contributiva/

Sabalier Law (August 2030). Incentivos Fiscales Actualizados de Puerto Rico, taken from https://www.sabalierlaw.com/es/blog/incentivos-fiscales-actualizados-de-puerto-rico/