Puerto Rico Act 60 Export Services Tax Rate: Complete 2026 Guide

If you are a U.S.-based business owner paying combined federal and state corporate tax rates of 25% to 30%, Puerto Rico's Act 60 export services incentive offers a legally available alternative: a 4% fixed corporate income tax rate on qualifying export service income. This guide breaks down the full tax structure under Act 60 Chapter 3, the services that qualify, the application process, compliance obligations, and how the numbers compare to mainland corporate taxation.

What Is Act 60 and How Does Chapter 3 Work?

Act 60, formally known as the Puerto Rico Incentives Code, was enacted in 2019 to consolidate more than 30 prior incentive statutes into a single framework. Chapter 3 replaced and updated the former Act 20 (Export Services Act).

Under Chapter 3, businesses that establish bona fide operations in Puerto Rico and provide qualifying services to clients located outside of Puerto Rico can receive a tax decree granting significant tax reductions. The decree is a binding contract between the business and the Government of Puerto Rico, typically lasting 15 years with the option to request a 15-year renewal.

Act 60 Export Services Tax Rates: A Detailed Breakdown

4% Fixed Corporate Income Tax Rate

Qualifying export service income is taxed at a flat 4% corporate income tax rate. This replaces Puerto Rico's standard corporate tax rates, which can reach up to 37.5%.

100% Exemption on Distributions to Shareholders

Dividends or profit distributions paid from decree-eligible income to shareholders are 100% exempt from Puerto Rico income tax. This eliminates double taxation.

75% Municipal License Tax Exemption

Qualifying businesses receive a 75% exemption from the municipal license tax (patente municipal), reducing the effective rate to approximately 0.125% to 0.375%.

60% Property Tax Exemption

Real and personal property used in the exempt operation receives a 60% exemption from municipal property taxes.

100% Dividend Exemption

Dividends received from the earnings and profits of the export service business are 100% exempt from Puerto Rico taxation.

Tax Rate Comparison: Puerto Rico Act 60 vs. Mainland U.S. States

Comparison for a business earning $1,000,000 in net income:

Puerto Rico Act 60: Combined effective rate ~4%, tax on $1M = ~$40,000

California: Combined effective rate ~29.84%, tax on $1M = ~$298,400 (savings vs Act 60: ~$258,400)

New York: Combined effective rate ~27.5%, tax on $1M = ~$275,000 (savings vs Act 60: ~$235,000)

Florida: Combined effective rate ~26.5%, tax on $1M = ~$265,000 (savings vs Act 60: ~$225,000)

Key note: Because Puerto Rico is a U.S. territory, income sourced to Puerto Rico under a valid Act 60 decree is generally not subject to U.S. federal income tax under Section 933 of the Internal Revenue Code.

Qualifying Export Services Under Act 60 Chapter 3

Chapter 3 covers a broad range of service categories. The critical requirement is that the services must be provided to persons or entities located outside of Puerto Rico.

• Consulting and Advisory Services: Management consulting, strategic advisory, and professional consulting

• Technology and Software Services: Software development, IT consulting, cloud services, cybersecurity, data analytics, AI, SaaS platforms

• Financial Services: Financial advisory, fund administration, investment management support, accounting, fintech

• Marketing and Advertising: Digital marketing, brand strategy, advertising, PR, social media management

• Research and Development: Scientific research, product development, clinical research support

• Engineering and Architecture: Professional engineering, architectural design, environmental consulting

• Call Centers and Shared Services: Centralized call center operations and back-office functions

• Educational and Training Services: Online education, corporate training, e-learning platforms

• Creative and Media Services: Film production, graphic design, content creation, animation

Application Process and Timeline

Step 1: Eligibility Assessment — Evaluate whether your business meets core requirements: bona fide operations in PR, services to off-island clients, and economic substance.

Step 2: Application Filing — Submit to the DDEC with business plan, projected employment, proof of export services, and corporate documentation.

Step 3: Review and Approval — Standard processing timeline is 60 to 120 days.

Step 4: Decree Issuance — A binding agreement specifying tax rates, term, and conditions.

Typical Application Costs

DDEC Filing Fee: $750. Legal Fees: $5,000-$15,000. CPA/Tax Advisor: $2,000-$5,000. Miscellaneous: $500-$1,500. Total estimated range: $8,250-$22,250.

Annual Compliance Requirements

Decree holders must file annual reports with DDEC, pay a $5,000 annual compliance fee, file PR corporate tax returns, maintain minimum employment levels, and demonstrate genuine economic substance.

Estimated Annual Compliance Costs

DDEC Annual Fee: $5,000. CPA/Tax Preparation: $3,000-$8,000. Legal Compliance Review: $2,000-$5,000. Total estimated range: $10,000-$18,000/year.

2025-2026 Program Updates

• Increased Scrutiny on Economic Substance: The DDEC has increased review of whether decree holders maintain genuine operations

• Digital Services and Remote Work: DDEC is refining its approach to remote and hybrid work models

• Processing Timelines: Plan for 90-120 days rather than the 60-day minimum

• Municipal Tax Changes: Several municipalities have adjusted local tax rates

• Federal Tax Landscape: Ongoing discussions about minimum corporate tax rates could affect certain structures

Who Is the Ideal Candidate for Act 60 Chapter 3?

• Service-based businesses generating $200,000+ in annual net income from off-island clients

• Business owners willing to relocate or establish meaningful operational presence

• Companies with scalable models not dependent on physical proximity to clients

• Entrepreneurs in technology, consulting, financial services, marketing, and creative industries

• Business owners currently paying combined rates above 25%

Next Steps: Evaluate Your Eligibility

Act 60 Chapter 3 remains one of the most significant tax reduction tools legally available to U.S. service businesses. The 4% corporate rate, combined with full exemptions on distributions and dividends, creates an effective tax structure that no mainland jurisdiction can match.

Riefkohl Law advises businesses and individuals on Act 60 applications, compliance, and tax planning. To discuss whether Act 60 export services incentives are right for your business, schedule a free strategy call.

Call: (787) 236-1657

Book online: Visit riefkohllaw.com/calendly to schedule your free consultation

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult with qualified legal and tax professionals before making decisions.