Tax Planning
Tax Planning for Digital Nomads in Puerto Rico: Leveraging Act 60 Incentives
How digital nomads can use Puerto Rico’s Act 60 incentives, including individual investor tax benefits, while managing U.S. filings and residency.
By NomadicTax Research Team • 7 min read • September 6, 2026
## What Is Puerto Rico’s Act 60 & Who Qualifies
Act 60-2019, the Tax Incentives Code of Puerto Rico, consolidated earlier Acts like **Act 20** & **Act 22** to streamline incentives targeting businesses & individuals. ([irs.gov](https://www.irs.gov/pub/irs-pgld/introduction-to-puerto-rico-acts-20-and-22.pdf?utm_source=openai)) These were formerly known respectively for promoting exports/services (Act 20) and for individual investor relocation (Act 22), now both under the umbrella of Act 60 since January 1, 2020. ([irs.gov](https://www.irs.gov/pub/irs-pgld/introduction-to-puerto-rico-acts-20-and-22.pdf?utm_source=openai))
To qualify for the individual investor incentives, digital nomads typically must:
- Become a **resident of Puerto Rico**—with a bona fide status as covered in the compliance article;
- Make **investments or assets** locally under conditions defined by Act 60—often requiring some holding period;
- File for and receive a decree under Act 60—which provides tax rates and benefits under the law.
## Key Benefits for Digital Nomads Under Act 60
| Benefit | What It Offers |
|---|---|
| **Zero tax on most passive income** | Dividends, interest, and long-term capital gains earned after becoming a resident may be taxed at near-zero rates under decree benefits. |
| **Preferential tax rate for active businesses** | If you run export services (e.g., digital marketing, software), under Act 60/Act 20 your company may qualify for reduced tax rates, often 4%. |
| **Deferral/non-recognition of gains** | With proper structuring, nonresidents relocating and holding assets before residency can defer or reduce U.S. capital gains exposure. |
## Interplay with U.S. Filing Obligations
Even with Puerto Rico incentives, U.S. rules like **GILTI, FTC** (foreign tax credits), and **deemed repatriation** apply if you’re a U.S. citizen or resident:
- You’ll still need to file Form 1040 if you have U.S.-source income (unless Puerto Rico source income is excluded) and declare your worldwide income to Puerto Rico. Example: U.S. Federal employment income is always taxed by U.S. government even from PR. ([irs.gov](https://www.irs.gov/publications/p570?utm_source=openai))
- If your digital nomad business operates through a PR entity, U.S. shareholders may face CFC/GILTI implications. Matching your structure (corporation, LLC, trust) matters. Consult specialized cross-border planning advisors.
## Practical Planning Strategies
1. **Time your move**: To qualify as bona fide resident, you’ll need to meet tests. Arriving mid-year may complicate full-year benefits. Ensure you satisfy at least two prior years if required.
2. **Asset disposition before arrival**: Realize gains before becoming resident to benefit under favorable Puerto Rico provisions instead of U.S. capital gains tax rules fully applying.
3. **Lease or rent locally & hire locally**: Helps meet substance for any company you set up under Act 60.
4. **Obtain a tax decree**: Make sure you apply for and receive your decree under Act 60 for certainty of rates and tax liabilities.
5. **Document U.S. source vs Puerto Rican source income**: Maintain contracts, invoices, proofs of where services are rendered.
## Example Scenario
**David**, a U.S. citizen digital nomad, moves to Puerto Rico on January 1, 2026:
- Starts an export consulting business from PR; applies under Act 60 for a decree under the former Act 20 provisions.
- His client contracts are with U.S. and international clients. Under Act 20 (export services), he qualifies for PR tax rate of 4% on service income.
- He later sells stocks he held before residency—arguing gains realized post-residency may benefit under zero-or-low capital gains treatment. He keeps detailed logs to establish pre-residency acquisition.
- He files PR return with worldwide income; files U.S. return only for non-exempt U.S. source income; uses FTC or credit avoidance where applicable.
## Risks & Common Pitfalls
- **Failing bona fide test**: Falling just short of presence or closer connection kills benefits.
- **Misreporting source income**: Revenue from U.S. clients does **not** automatically mean U.S source—it depends where work is performed, contracts signed.
- **Not obtaining or renewing decree**: Decrees typically require annual compliance; missing steps can void benefits.
- **Ignoring U.S. anti-abuse rules**: Foreign trust rules, beneficial ownership, tax court scrutiny intensify. Always structure relations carefully.
## In Summary
Puerto Rico under Act 60 offers powerful incentives for digital nomads—particularly for investors & export service providers. With careful planning around residency timing, asset gains, and compliance, benefits can be substantial. As always, work with cross-border advisors to align both U.S. and Puerto Rico filings to avoid surprises.