If you’re looking for one of the most powerful legal ways to reduce corporate taxes in a U.S. jurisdiction, Act 60 Export Services in Puerto Rico stands out as a game-changer. This incentive, formerly known as Act 20, is now part of Puerto Rico’s broader Incentives Code (Act 60) and is specifically designed to attract service-based businesses that export their services outside of Puerto Rico.

At its core, the program allows eligible businesses to operate with a dramatically reduced corporate tax rate—just 4%—as long as they provide services to clients located outside Puerto Rico. Think of it as Puerto Rico saying, “Bring your global business here, create local economic activity, and we’ll reward you with one of the lowest tax rates available in any U.S. territory.”

What makes this especially compelling is that Puerto Rico is still under U.S. jurisdiction. That means U.S. entrepreneurs don’t need visas, and they can operate within a familiar legal and financial framework while benefiting from a tax environment that rivals offshore jurisdictions. It’s like getting the best of both worlds—credibility and tax efficiency—without stepping outside the U.S. system.

Overview of Puerto Rico’s Incentives Code

Act 60 consolidates several tax incentive programs into one unified law. Export Services is one of its most popular components, targeting industries that can operate remotely or serve global clients digitally.

Why Export Services Matter

Puerto Rico’s economy benefits when businesses bring external revenue into the island. Export services do exactly that—they generate income from outside markets while creating jobs locally. That’s why the government offers such attractive incentives.

Key Benefits of Act 60 Export Services

Let’s talk about what really draws businesses in—the financial upside.

4% Corporate Tax Rate

The headline benefit is the fixed 4% corporate income tax rate. Compared to the standard U.S. federal corporate tax rate of 21% (plus state taxes), this is a massive reduction.

Imagine running a profitable consulting or tech company and paying less than a quarter of what you’d typically owe in taxes. Over time, that difference compounds into millions of dollars in retained earnings.

100% Dividend Tax Exemption

Another standout benefit is that dividends distributed from the Act 60 company to Puerto Rico resident owners are 100% tax-free. This creates a powerful structure:

  • Company earns income at 4% tax
  • Profits distributed as dividends
  • Owners receive income tax-free (if compliant)

This setup allows entrepreneurs to legally extract profits with minimal tax friction.

Tax Credits and Additional Incentives

Depending on your business type, you may also qualify for:

  • Tax credits for job creation
  • Property tax exemptions
  • Municipal tax reductions

These additional perks can further lower your operational costs, making Puerto Rico even more attractive.

Eligible Services Under Act 60

Not every business qualifies—you must be exporting services outside Puerto Rico.

Consulting and Professional Services

This includes:

  • Legal and accounting services
  • Business consulting
  • Marketing and advertising

If your clients are outside Puerto Rico, you’re likely eligible.

Technology and Software Development

Tech companies are among the biggest beneficiaries. Services include:

  • SaaS platforms
  • App development
  • IT consulting

Since these businesses often operate remotely, relocating to Puerto Rico is relatively seamless.

Financial and Investment Services

This covers:

  • Investment advisory
  • Asset management
  • Financial analysis

High-income financial firms often use Act 60 to significantly reduce tax exposure.

Requirements to Qualify

The benefits are attractive—but they come with strict requirements.

Puerto Rico Business Presence

Your company must be based in Puerto Rico. That means:

  • A physical office
  • Local operations
  • Management conducted from the island

You can’t just register a company—you need real substance.

Local Employment Requirements

Most businesses must hire at least one full-time employee in Puerto Rico. Higher-revenue companies may need more employees to maintain compliance.

Bona Fide Residency for Owners

To maximize benefits (especially dividend exemptions), owners should become bona fide Puerto Rico residents. This involves:

  • Spending at least 183 days per year in Puerto Rico
  • Establishing a primary home there
  • Demonstrating closer ties to Puerto Rico than elsewhere

Application Process

Getting approved requires careful planning.

Step-by-Step Guide to Apply

  1. Form a Puerto Rico entity
  2. Prepare a detailed business plan
  3. Submit an application through Puerto Rico’s incentives portal
  4. Pay the application fee
  5. Receive your tax exemption decree

Once approved, your benefits are typically locked in for up to 15–20 years, providing long-term tax certainty.

Costs and Timeline

  • Application fee: ~$750 to $5,000
  • Annual compliance costs: variable
  • Approval timeline: 2–6 months

Working with experienced legal and tax advisors can streamline the process.

Compliance and Ongoing Obligations

Approval isn’t the finish line—it’s the starting point.

Annual Reporting

You must file annual reports demonstrating compliance with:

  • Revenue sourcing rules
  • Employment requirements
  • Operational presence

Minimum Payroll and Operations

Maintaining local employees and business activity is essential. Failure to meet requirements can result in losing your tax benefits.

Tax Strategies and Planning

This is where things get really interesting.

Combining Act 60 Export Services with Individual Incentives

Many entrepreneurs combine Export Services with individual tax incentives (formerly Act 22). The strategy looks like this:

  • Business income taxed at 4%
  • Dividends distributed tax-free
  • Capital gains potentially taxed at 0%

This creates one of the most efficient tax structures available to U.S. citizens.

Advantages and Disadvantages

Advantages

  • Extremely low corporate tax rate
  • Tax-free dividends for residents
  • Access to U.S. legal system
  • Long-term tax certainty

Disadvantages

  • Must relocate to Puerto Rico
  • Compliance requirements are strict
  • Upfront and ongoing costs
  • Regulatory changes are possible

Who Should Consider Act 60 Export Services?

This incentive is ideal for:

  • Digital entrepreneurs
  • Consultants and agencies
  • SaaS and tech founders
  • Financial service providers

If your business serves clients globally and isn’t tied to a physical location, Act 60 can be a powerful tool.

Conclusion

Act 60 Export Services offers a rare opportunity to operate a global business while paying a fraction of standard U.S. tax rates. It’s not just about saving money—it’s about creating a more efficient structure that allows your business to grow faster and retain more profits.

But like any powerful tool, it requires careful handling. Compliance, residency, and operational requirements must be taken seriously. If done right, the rewards can be transformative.

FAQs

1. What is the tax rate under Act 60 Export Services?

The corporate tax rate is 4%, significantly lower than standard U.S. rates.

2. Do I need to live in Puerto Rico?

For maximum benefits, especially tax-free dividends, yes—you should become a bona fide resident.

3. Can any business qualify?

No, only businesses that export services outside Puerto Rico are eligible.

4. How long do the benefits last?

Typically between 15 to 20 years, depending on your decree.

5. Is Act 60 still available in 2026?

Yes, it remains active, though regulations may evolve over time.