Starting a business in
🇵🇷Puerto Rico
Checked November 4, 2026 · How we score
Corporate tax
4%
Top income tax
33%
Setup from
$3,000
all-in, first year
Time to form
13 weeks
visit usually needed
Taxes in Puerto Rico
| Corporate income tax | 4% 4% applies only to eligible export-services income under an Act 60 (Puerto Rico Incentives Code) decree from DDEC; ordinary corporate income is taxed at 18.5% with a surtax rising to a maximum of about 37.5%. Services to Puerto Rico clients do not qualify. Applications run through DDEC; reported processing is three to six months and fees run into several thousand dollars. 2026 legislative changes to Act 60 reportedly focused on the individual investor chapter and left the export-services rate unchanged, so verify with DDEC. |
|---|---|
| Personal income tax (top) | 33% Puerto Rico residents pay local tax up to 33% on worldwide income. Bona fide PR residents who are US citizens generally exclude PR-source income from US federal tax (IRC §933), so Act 60 gains are taxed only in Puerto Rico; US-source income remains federally taxable. Non-US founders become tax residents of PR if they meet the presence, tax-home and closer-connection tests. |
| Tax system | Worldwide income |
| Capital gains tax | 15%15% flat for long-term gains of residents; Act 60 individual investors can obtain 0% on Puerto Rico-source gains accrued after becoming residents. A 2026 amendment reportedly introduces a 4% rate on passive gains for investors applying from 2027, which is not yet confirmed by official text. |
| Dividend withholding (non-residents) | 15% |
| VAT / GST | 11.5% |
| Social security | IVU sales and use tax 11.5% (10.5% state + 1% municipal); business-to-business services are taxed at 4%. Employer FICA-type payroll contributions apply, as in the US. Dividends from exempt Act 60 income are tax-free to resident shareholders; the dividend withholding for non-resident aliens is 15% by default. |
Forming a company in Puerto Rico
| Usual entity | Puerto Rico corporation or LLC (with a DDEC decree) |
|---|---|
| Minimum capital | None |
| Setup cost (all-in) | $3,000–$12k |
| Annual running cost | $4,000–$15k |
| Time to incorporate | 13 weeks |
| Form remotely as a foreigner | No |
| Local director required | No |
| Local address required | Yes |
| Owners on public register | No |
| Statutory audit for small companies | Yes |
| Business banking for non-residents | Fairly easy |
Residency and visas
US citizens can move to Puerto Rico freely; non-US nationals need a US visa or green card to live there. Act 60 individuals must become bona fide residents: 183+ days in PR, a tax home in PR, no closer connection to the US or another country, and not having been a PR resident in the prior six years. Act 60 'Resident Individual Investor' decrees require an annual donation (US$10,000 to a local nonprofit) and buying a residence within two years.
| Digital nomad visa | No |
|---|---|
| Golden visa | No |
| Ease of residency for founders | 3/5 (1 = easiest) |
Special tax regimes
Act 60 Export Services (4%)
Eligible service exporters with a DDEC decree pay 4% income tax on export-services income, plus 0% tax on distributions of that income to PR resident owners; decrees last 15 years and can be renewed.
Act 60 Resident Individual Investor
New PR residents can pay 0% on Puerto Rico-source passive income and capital gains accrued after the move, subject to a US$10,000 annual donation and a residence purchase. Proposed 2026 reforms would raise the capital gains rate to 4% for applicants from 2027.
Puerto Rico Tax Reform proposals
Tax reform bills in 2025–2026 have proposed lower regular rates and changes to incentives, but have not replaced Act 60. Confirm the status of any change with DDEC and Hacienda before relocating.
Pros and cons
Why founders pick Puerto Rico
- US legal system, USD, US banks and Stripe
- 4% tax on export services and tax-free dividends for decree holders
- US citizens avoid federal tax on Puerto Rico-source income
- No need for visas for US citizens
Watch out for
- Act 60 requires real relocation and 183+ days in Puerto Rico
- US-source income and US federal rules still apply; IRS scrutiny of decree holders
- Regular corporate tax is high (up to 37.5%) outside the decree
- Application fees, annual fees and compliance costs, plus political and policy risk
Best for: US citizens and green-card holders who can relocate and want 4% tax · Remote service businesses and consultants with clients outside Puerto Rico · Crypto and fintech founders who want US banking and legal certainty
Puerto Rico: common questions
What is the Puerto Rico corporate tax rate under Act 60?
Eligible export-services companies with a DDEC decree pay 4% on export income, and dividends paid to Puerto Rico resident owners from that income are exempt. Without the decree, corporate tax is 18.5% plus a surtax up to a maximum of about 37.5%. The 4% rate does not apply to services performed for clients in Puerto Rico.
Do I have to move to Puerto Rico to get Act 60 benefits?
Yes, for individual benefits. You must be a bona fide resident: present for at least 183 days a year, with your tax home and closer connection in Puerto Rico, and not a resident in the previous six years. A non-resident owner of a Puerto Rico company cannot claim the personal exemptions.
Is Act 60 changing in 2026?
A 2026 amendment (reported as Act 38-2026) reportedly rewrote the individual investor chapter and would apply a 4% rate on passive capital gains for new applicants from 2027, while leaving the 4% export-services rate unchanged. Official texts should be confirmed with DDEC and Hacienda, since sources are mostly advisory firms.
Do US citizens in Puerto Rico pay federal income tax?
Bona fide residents of Puerto Rico who are US citizens exclude Puerto Rico-source income from US federal income tax (IRC §933), but still pay federal tax on US-source and other foreign-source income and file federal returns. Federal payroll taxes and self-employment tax generally still apply.
How much does an Act 60 decree cost?
Application and annual fees run to several thousand dollars each (advisor sources cite about $5,000 application and $5,000 annual fees), plus legal and accounting costs. The process usually takes three to six months, so budget roughly $3,000–$12,000 upfront and $4,000–$15,000 annually.
Sources
- DDEC Puerto Rico: Incentives Code (Act 60)
- Departamento de Hacienda de Puerto Rico
- PwC Worldwide Tax Summaries: Puerto Rico
Compare Puerto Rico
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Not tax or legal advice. Rates and rules change; we check official sources and update every page, but verify with a licensed adviser in the country before acting. Spotted something out of date? Use the correction form below.