Does Act 60 Eliminate GILTI and Subpart F Tax?

Short answer: no. If you own a foreign company, moving to Puerto Rico does not switch off U.S. anti-deferral tax.

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Content current as of June 2026. Federal anti-deferral rules were significantly revised by 2025 federal legislation; rates and deductions should be confirmed with your CPA and counsel. This page is for general informational purposes only, does not constitute legal or tax advice, and does not create an attorney-client relationship.

The short answer

An Act 60 Individual Resident Investor decree is a Puerto Rico tax result. It does not rewrite the federal tax code. A bona fide Puerto Rico resident is still a U.S. person — and if you are a U.S. shareholder of a controlled foreign corporation (CFC), the U.S. anti-deferral rules known as Subpart F and GILTI can continue to tax certain of that company's earnings to you currently, whether or not the company distributes them. Section 933 does not shelter those inclusions. For many business owners, this is one of the most expensive surprises in an Act 60 move — and it is avoidable with planning.

Why your decree doesn't reach these taxes

IRC §933 excludes Puerto Rico-source income from U.S. federal tax for a bona fide resident. Your Act 60 decree, in turn, sets the Puerto Rico rate (0% or 4%) on qualifying income. Neither one touches a Subpart F or GILTI inclusion, because:

  • A Subpart F / GILTI inclusion is a creature of federal law that arises from your status as a U.S. shareholder of a CFC;
  • The inclusion is generally not Puerto Rico-source income, so §933 does not exclude it; and
  • Your decree governs Puerto Rico tax, not the federal inclusion.

In other words, the decree and §933 protect the wrong layer. The CFC inclusion sits on top, at the federal level, untouched.

GILTI and Subpart F in plain English

Subpart F (in the Code since 1962) taxes a U.S. shareholder currently on certain categories of a CFC's income — typically passive income and certain related-party sales and services income — even if nothing is distributed.

GILTI (enacted in 2017) sweeps in much of a CFC's remaining active earnings. Note that 2025 federal legislation revised this regime and renamed it Net CFC Tested Income (NCTI), changing the deduction and the effective rate for tax years beginning in 2026. The precise rate that applies to you should be modeled with your CPA — but the structural point is unchanged: active foreign-company earnings can be taxed to a U.S. shareholder currently, and a Puerto Rico decree does not stop it.

Who this actually hits

  • Owners of a foreign operating company (consulting, e-commerce, software, services, holding structures) who relocate but keep the entity offshore;
  • Founders and investors holding interests in foreign corporations through which active income flows;
  • Anyone receiving K-1s from structures that include a CFC; and
  • Anyone who assumed "0% in Puerto Rico" meant their business income would be federally tax-free after the move.

If that describes you, the structuring of your business — not just your personal residency — needs its own review before you move. Your federal information-reporting duties (FBAR, FATCA/Form 8938, CFC/PFIC reporting) also continue; see Federal Reporting Obligations for Act 60 Decree Holders.

Individual decree vs. export-services business — two different things

Act 60 Chapter 2 is the Individual Resident Investor decree covering your personal interest, dividend, and capital-gain income. A Puerto Rico operating business is a different question, often addressed under the Export Services rules (Chapter 3), with its own requirements and its own Puerto Rico tax treatment. Restructuring an offshore company into a properly run Puerto Rico entity is frequently the answer to a GILTI/Subpart F problem going forward — though unwinding or relocating an existing foreign company can itself trigger U.S. tax and must be modeled before you act. It is a deliberate structuring decision, not an automatic result of getting an individual decree. See Act 60 Export Services.

What Act 60 does do for a business owner

This page is not a reason to skip Act 60 — it is a reason to plan it properly. A well-structured move can still deliver a 0% or 4% Puerto Rico rate on qualifying personal investment income, and a properly established Puerto Rico operating company can change the analysis on business income entirely. The mistake is assuming the individual decree alone solves the business side. It doesn't; a separate structuring review does.

Frequently Asked Questions

Not automatically. If the company is a controlled foreign corporation and you are a U.S. shareholder, Subpart F and GILTI/NCTI can tax certain of its earnings to you currently at the federal level. Your Act 60 decree sets your Puerto Rico rate; it does not eliminate the federal inclusion, and IRC §933 does not shelter it. The path to a better business-tax outcome is usually restructuring, not the individual decree alone.

Section 933 excludes Puerto Rico-source income from U.S. federal tax for a bona fide resident. A Subpart F or GILTI/NCTI inclusion is generally not Puerto Rico-source income, so §933 does not exclude it. The inclusion remains federally taxable independent of your decree.

Often, yes — but it depends on your facts. Moving genuine operations into a properly established and operated Puerto Rico entity (frequently under the Export Services rules) can change the analysis, while a paper move that leaves the CFC offshore generally does not. This requires a structuring review coordinated between Puerto Rico counsel and your U.S. CPA, ideally before you relocate.

Yes. 2025 federal legislation revised the GILTI regime and renamed it Net CFC Tested Income (NCTI), adjusting the deduction and effective rate for tax years beginning in 2026. The exact figures should be confirmed with your CPA, but the core point for an Act 60 mover is unchanged: anti-deferral rules still reach CFC earnings, and a Puerto Rico decree does not stop them.

Related Resources

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The information on this page is for general educational purposes only and does not constitute legal or tax advice. Federal anti-deferral rules (Subpart F, GILTI/NCTI) are complex, fact-specific, and were recently amended; rates and outcomes depend on your individual circumstances. No attorney-client relationship is formed by viewing this content. For advice specific to your situation, schedule a consultation.