The Resident Individual Investor decree is the Act 60 incentive for people who move to Puerto Rico and earn investment income. It replaced Act 22-2012 in 2019, and many people still call it "Act 22." It lives in Sections 2021.01, 2022.01 and 2022.02 of the Puerto Rico Incentives Code.
The decree changed in March 2026, when Act 38-2026 created a new set of rules for anyone who applies from January 1, 2027. Because the date you apply now matters a great deal, this guide treats the two regimes side by side. It reflects the official consolidated text of the Code as revised July 16, 2026, and IRS publications for tax year 2025.
Who can apply
To qualify under Section 1020.02(a)(4) of the Code, you must:
- Become a Puerto Rico resident under the Puerto Rico Internal Revenue Code, no later than the tax year ending December 31, 2055.
- Not have been a Puerto Rico resident between January 17, 2006 and January 17, 2012. This carryover from Act 22 still applies.
- If you apply after December 31, 2026, show at least six years of non-residence in Puerto Rico before your move.
The Code excludes people whose domicile never really left Puerto Rico, such as students who lived on the island before leaving to study, or Puerto Rico government staff temporarily working elsewhere.
Your application date controls. The regime you get depends on when you file the application in DDEC's Incentives Portal, not on when you move.
How the income is taxed
The decree covers three kinds of income, all realized after you become a resident.
| Income | Applied by Dec. 31, 2026 | Applied on or after Jan. 1, 2027 |
|---|---|---|
| Interest and dividends | Fully exempt through Jan. 1, 2036 | Fixed 4% rate through Jan. 1, 2056 |
| Gains on appreciation after the move | Fully exempt if recognized before Jan. 1, 2036 | Fixed 4% if recognized before Jan. 1, 2056 |
| Long-term gains on appreciation before the move | 5% if recognized after 10 years of residence and before Jan. 1, 2036 | 5% if recognized after 10 years of residence and before Jan. 1, 2056 |
A few details make a real difference:
- No alternative minimum tax. The exemption and the special rates replace Puerto Rico's alternative basic tax as well.
- Securities and "other assets." The gain rules cover securities and what the Code calls "other assets": commodities, currencies and digital assets built on blockchain technology.
- A better rate wins. Under the 2027 rules, if another provision gives the same income a lower rate, that rate applies.
- What the decree does not cover. Wages, business income earned in Puerto Rico, rents and other income are taxed at Puerto Rico's regular rates unless another decree covers them.
- Selling pre-move assets too soon. If you sell, within your first 10 years as a resident, an asset that had already gained value before you moved, the pre-move part of that gain is taxed under the regular Puerto Rico Internal Revenue Code, not at 5%.
What you must do every year
Donate at least $10,000. Starting with the second tax year of the decree, you must give at least $10,000 a year to nonprofits operating in Puerto Rico and certified under Section 1101.01 of the Puerto Rico Internal Revenue Code. The organization cannot be controlled by you or your relatives or partners. Section 6020.10(b) splits the minimum: $5,000 to child-poverty nonprofits on a list published each year by a legislative commission, $2,500 to another nonprofit not on that list, and $2,500 to the Special Fund for Social Equality. The same paragraph also says nothing prevents sending 100% to listed organizations, so confirm the current split with your adviser or DDEC before you give.
Own your home. Within two years of receiving the decree, you must buy real property in Puerto Rico as your principal residence, in your name or jointly with your spouse, from an unrelated seller. You must keep it for the life of the decree. For applications from January 1, 2027, the deed must be recorded, or pending recording, in Puerto Rico's Property Registry in your name, jointly with your spouse or in a qualifying investor trust.
File the annual report. Each year you file an annual report with DDEC, with a $5,000 charge fixed by Section 6020.10(d) and the evidence of your donation and residence. For tax year 2025, DDEC's guidance is that resident investors file by May 15, 2026, or within 30 days after filing the Hacienda return on extension, as their decree provides. An automatic extension of the report costs $105. Missing reports trigger automatic fines of $1,000 and then $5,000, and DDEC may start revocation. Our guide to the annual decree report has the full calendar.
File your Puerto Rico return. You still file an individual income tax return with Hacienda every year. See Puerto Rico income tax basics.
The federal side
The decree is a Puerto Rico benefit. For a U.S. citizen, the federal result depends on two separate questions.
Are you a bona fide resident?
Under IRC Section 937, explained in IRS Publication 570, you are a bona fide resident of Puerto Rico for a tax year if you meet all three tests:
- Presence test. You meet one of five options, including at least 183 days in Puerto Rico during the year, or no more than 90 days in the United States.
- Tax home test. Your tax home, generally your main place of work, is not outside Puerto Rico.
- Closer connection test. You do not have a closer connection to the United States or a foreign country than to Puerto Rico. The IRS looks at things like where your family lives, where you vote, your driver's license and where you bank.
In the year you move, you file Form 8898 if your worldwide gross income is more than $75,000. The penalty for not filing is $1,000.
Is the income Puerto Rico-source?
Even as a bona fide resident, Section 933 excludes only Puerto Rico-source income. Under the general rules summarized in IRS Publication 1321, interest is sourced by the residence of the payer and dividends by the location of the payer. Dividends from a U.S. corporation are generally U.S.-source and stay taxable by the IRS, decree or not.
Gains on personal property such as stock are generally sourced by the seller's tax home. But there is a special rule: if you were a U.S. citizen or resident in any of the 10 years before the year of sale, gains on certain property you owned before becoming a bona fide resident are not treated as Puerto Rico-source. An election lets you treat the part of the gain that built up while you were a resident as Puerto Rico-source.
Hypothetical example. Priya applies for her decree in February 2027 and becomes a bona fide resident that year. In 2028 she buys publicly traded shares for $150,000 and sells them in 2031 for $400,000, a gain of $250,000.
- Puerto Rico: under the 2027 rules, the gain is taxed at a fixed 4%: $250,000 × 4% = $10,000.
- Federal: she bought the shares after becoming a bona fide resident and her tax home is in Puerto Rico, so the gain is generally Puerto Rico-source and excluded under Section 933, as long as she keeps meeting all three residency tests.
If Priya had also received $20,000 of dividends from a U.S. company, those would generally be U.S.-source and taxable on her federal return.
The IRS compliance campaign
The IRS Large Business and International division lists "Puerto Rico Act 22, Individual Investors Act" among its active compliance campaigns. According to the IRS, it addresses taxpayers who claimed Act 22 benefits without meeting Section 937, and those who meet Section 937 but report U.S.-source income as Puerto Rico-source income. The IRS says it uses examinations, outreach and soft letters.
Frequently asked questions
I'm moving in 2026. Should I apply before the end of the year?
That is a personal decision with many factors, including whether you meet the eligibility rules and can keep up the obligations. What the law says is simple: applications filed by December 31, 2026 get the full exemption through 2035, and applications filed from January 1, 2027 get the 4% rate through 2055, plus the six-year non-residence rule.
Can an existing decree holder switch to the 2027 rules?
Yes, according to Section 6020.03(d) as added by Act 38-2026. Holders of Act 22 decrees, and of Act 60 decrees applied for by December 31, 2026, may request a modification to adopt the 4% rate and the 2056 end date.
Does the decree lower the tax on my salary?
No. Wages and business income are taxed at regular rates. If you run a qualifying service business that serves clients outside Puerto Rico, an Export Services decree is a separate incentive with its own rules.
Are hard-to-recruit professionals and physicians subject to the donation?
No. The Code exempts holders of those decrees from the $10,000 donation. It applies to resident investors.
Sources
- Office of Management and Budget of Puerto Rico (OGP), "Código de Incentivos de Puerto Rico, Ley 60-2019, as amended (rev. July 16, 2026)". bvirtualogp.pr.gov
- OGP, "Ley Núm. 38 de 2026 (P. de la C. 505)". bvirtualogp.pr.gov
- IRS, "Publication 570 (2025), Tax Guide for Individuals With Income From U.S. Territories". irs.gov
- IRS, "Publication 1321 (October 2025)". irs.gov
- IRS, "Instructions for Form 8898 (Rev. October 2024)". irs.gov
- IRS, "LB&I Active Campaigns". irs.gov
- DDEC Incentives Office, "Boletín Informativo Núm. DDEC 2026-005". docs.pr.gov
787TAX is an independent guide. It is not Puerto Rico's Departamento de Hacienda, the CRIM or the IRS. This page is general information, not tax or legal advice. Example figures are hypothetical. Found an error? Tell us.
