Puerto Rico replaces 0% passive income rate with 4% for new Act 60 investors

Puerto Rico's 4% rate replaces 0% for new Act 60 investors

Puerto Rico amended its Act 60 resident individual investor regime under Act 38-2026, replacing the prior 0% treatment on passive income with a 4% rate on dividends, interest and certain post-residency capital gains for applications filed on or after Jan. 1, 2027. Existing decree holders are generally grandfathered under the prior framework, per the official law text and the DDEC Informative Bulletin No. 2026-004.

The April 2026 DDEC bulletin confirmed applications under the old 0% rate were accepted through Dec. 31, 2026. The resident investor program itself was extended through 2055 under the new regime.

Who feels the change

Expats and U.S. citizens relocating to the island for tax purposes are the main group affected. The shift raises the cost of qualifying passive income for anyone applying after the cutoff, though pre-move appreciation keeps its special treatment and more favorable rules apply when another Puerto Rico statute is triggered.

Digital nomads aren't the primary target. Act 60 hinges on bona fide Puerto Rico residency, presence tests and closer-connection rules, so casual remote workers passing through don't qualify. Puerto Rico's separate Act 27-2024 covers certain remote-work arrangements. Short-term tourists are outside the program entirely.

Costs and steps for new applicants

Beyond the 4% passive income rate, the broader Act 60 framework still offers:

• 4% fixed rate on eligible business income
• 75% property-tax exemption
• 50% municipal-license-tax exemption
• 15-year decree term, potentially renegotiable

Applicants filed on or after Jan. 1, 2027 face a tighter primary-residence proof standard. The home must show full ownership and title, with registration or pending registration in Puerto Rico's Property Registry. The property can be held in the investor's name, jointly with a spouse or through a qualifying trust.

Applications run through the incentives portal. Decree holders owe annual reporting, compliance fees and a charitable contribution, with amounts set by decree rules and supporting guidance.

Anyone weighing a move should compare the math before and after the cutoff, since locking in a 2026 application preserves the 0% rate on qualifying passive income for the decree term.

Read our full Puerto Rico guide for the complete picture.