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Act 60 Investor: Compliance Made Easy

November 29, 2024
Infographic showing Act 60 Investor compliance requirements, including residency tests, tax filing, annual reporting, and BOI obligations.

Act 60 Investor: Compliance Made Easy

Act 60 provides substantial tax incentives for investors relocating to Puerto Rico. However, maintaining compliance is essential to fully benefit from the program. This guide simplifies Act 60 compliance by covering residency requirements, tax filing, annual reporting, how to apply, and additional considerations.

Table of Contents

Residency Requirements

To qualify as an Act 60 investor, you must meet the following tests:

1. Presence Test

You must be physically present in Puerto Rico for at least 183 days annually. However, staying for over 200 days is recommended to ensure compliance. Keep a detailed day-by-day tracking sheet of your presence on the island.

2. Tax Home Test

Your primary place of business (tax home) must be in Puerto Rico. This includes the location of your main work, office, or professional activities.

3. Closer Connection Test

To demonstrate a closer connection to Puerto Rico than to the mainland U.S., consider these steps:

  • Property Ownership: Use Zillow or Clasificados Online to find properties in Puerto Rico.
  • Vehicles: You can transport your car from the mainland for $1,200–$3,300 but be prepared for an import tariff of up to 35%. Alternatively, use Clasificados Online to purchase vehicles locally.
  • Driver’s License: Obtain your Puerto Rico driver’s license without an agent. Medical reports can be completed onsite at the DMV for a small fee.
  • Voter Registration: Register with the Puerto Rico State Election Commission.

Tax Filing Requirements

1. U.S. Federal Taxes

As a U.S. citizen or resident, you’re generally required to file federal tax returns. However, Puerto Rico-sourced income can be excluded under Section 933 of the Internal Revenue Code.

  • Year of Move: Capital gains/losses must be prorated by the date of the move. Gains before the move are taxable by the IRS, while gains after are taxed by Puerto Rico.
  • Form 8898: Notify the IRS of your residency change using Form 8898.
  • Deadlines: File by April 15. Extensions to June 15 are available for Puerto Rico residents, but taxes owed are due by April 15.

2. Puerto Rico Taxes

File Puerto Rico Form 482 to report worldwide income. Qualifying Act 60 income, such as dividends and capital gains, may be exempt.

  • Deadline: April 15, with extensions available.

3. State Taxes

Income from mainland states, such as rental income from Virginia, requires filing non-resident state tax returns. Deadlines usually align with federal deadlines.

Annual Compliance Requirements

1. Annual Report

File your annual report with the Puerto Rico Department of Economic Development and Commerce (DDEC) by November 15. Include:

  • Proof of residency (e.g., utility bills or lease agreements).
  • A $5,000 compliance fee.

2. Charitable Contributions

Donate $10,000 annually to approved non-profits, with $5,000 addressing child poverty. Proof of donations is required with your report.

How to Apply for Act 60 Investor

Applying for Act 60 can be done independently or through professional assistance:

Before applying:

  • Consult with a CPA and tax attorney to ensure you meet all financial and tax requirements.
  • Speak with other Act 60 investors to learn about their experiences and gain practical insights.

Additional Considerations

  • BOI Reporting: Learn more in our BOI Report Guide.
  • Pay CRIM Taxes: Ensure timely payment of property taxes to Puerto Rico’s CRIM office to avoid penalties.
  • Mailing Tax Returns: Use USPS certified mail, retain receipts, and scan copies for your records.
  • Professional Assistance: Engage a tax professional experienced in U.S. and Puerto Rico tax laws.

By following these guidelines, Act 60 investors can fully leverage the program’s benefits while staying compliant with all legal requirements.

Maxim Liberty has been providing outsourced bookkeeping services to businesses and accounting firms in the USA and Canada since 2005.