In March 2026, House Bill 505 (Proyecto de la Cámara 505) became law as Act 38-2026 (Ley 38-2026). The official copy certified by the Puerto Rico Department of State is dated March 11, 2026. The law amends the Puerto Rico Incentives Code (Act 60-2019) as it applies to the Resident Individual Investor decree (decreto), the program formerly known as Act 22. According to its text, it took effect immediately.
If you're not familiar with the program, start with the Act 60 guide and the Resident Individual Investor decree guide.
The main change: from 0% to 4%
The date that decides everything is the date you apply for the decree:
| Item | Application through December 31, 2026 | Application starting January 1, 2027 |
|---|---|---|
| Interest and dividends | Exempt (0%) if earned before January 1, 2036 | Flat 4% rate if earned before January 1, 2056 |
| Appreciation gain after you move | Exempt if recognized before January 1, 2036 | 4% if recognized before January 1, 2056 |
| Appreciation gain from before you move (recognized after 10 years of residence) | 5% if recognized before January 1, 2036 | 5% if recognized before January 1, 2056 |
In both cases, these rates replace the regular tax under the Código de Rentas Internas (Internal Revenue Code of Puerto Rico) and the alternate basic tax. For applications starting in 2027, the law clarifies that if another provision offers a more favorable rate for that income, the more favorable rate applies.
Extension through 2055
Before, the Resident Investor program expired in 2035. Act 38-2026 lets you become an eligible resident through the tax year ending December 31, 2055.
New requirements for applications after 2026
- Six years away. For applications submitted after December 31, 2026, you must show that you were not a resident of Puerto Rico for at least six years before moving. The exclusion of people who were residents between January 17, 2006, and January 17, 2012, remains.
- Recorded primary residence. The Code requires you to buy a property in Puerto Rico as your primary residence, from an unrelated seller, within two years of getting the decree. For applications starting January 1, 2027, ownership must be recorded, or pending recording, in the Property Registry (Registro de la Propiedad) in the name of the decree holder, their spouse or a permitted trust. You show compliance with this requirement in the decree annual report.
What didn't change: the annual donation
Act 38-2026 doesn't touch the annual donation. In January 2026, the Office of Incentives of the Departamento de Desarrollo Económico y Comercio (Department of Economic Development and Commerce, DDEC) reminded decree holders in its Circular Letter 2026-001 that every Resident Investor must donate at least $10,000 a year: $5,000 to nonprofits on the official list that work to eradicate child poverty, at least $2,500 to the Special Fund for Social Equality (Fondo Especial para la Igualdad Social), and the rest to entities certified under Section 1101.01 of the Internal Revenue Code of Puerto Rico. You submit the evidence with the annual report.
What happens to current decrees
Article 6 provides that the rights and obligations of decrees granted under Act 22-2012 or Act 60-2019 before the law took effect will continue to be honored. Also:
- If you already have a decree, or applied for one no later than December 31, 2026, you can request an amendment to adopt the new terms (4% through 2055).
- Applications filed through December 31, 2026, that haven't been granted yet can be processed under the new rules, if the applicant chooses.
Frequently asked questions
Does this affect me if I already have an Act 22 or Act 60 decree?
Not automatically. Your decree continues to be honored. The law lets you request an amendment to adopt the 4% model through 2055. Review that option with an advisor.
What do I have to do to keep the previous rules?
Under the law, your decree application must be filed no later than December 31, 2026, and the decree can't have been revoked. Applications are handled by the DDEC.
Did the rate change for my Puerto Rico-source income, such as wages?
Act 38-2026 deals only with the Resident Investor's interest, dividends and capital gains. If you're moving to the island, read moving to or from Puerto Rico and tax residency.
What about federal taxes?
The decree is a Puerto Rico decree. For the IRS, excluding Puerto Rico-source income depends on being a bona fide resident. See Puerto Rico residents and the IRS.
Sources
- Biblioteca Virtual OGP, "Ley 38-2026 (P. de la C. 505)". bvirtualogp.pr.gov
- Biblioteca Virtual OGP, "Código de Incentivos de Puerto Rico [Ley 60-2019]". bvirtualogp.pr.gov
- Departamento de Desarrollo Económico y Comercio, "Carta Circular DDEC Núm. 2026-001 (OIN): Donaciones de Individuos Residentes Inversionistas". 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.
