DDEC Decree Revocation: Procedures, Consequences & Tax Reversion

Content current as of April 2026.

DDEC Administrative Revocation

The Department of Economic Development and Commerce (DDEC) has the authority to revoke Act 60 decrees through an administrative process. Under Act 52-2022, the Economic Incentives Review Committee (CRIE) oversees enforcement and can initiate revocation proceedings for decree holders who fail to comply with their obligations.

Grounds for Revocation

• Failure to file annual reports or pay the annual compliance fee
• Failure to complete biennial compliance certification (Act 52-2022 AUP)
• Non-compliance with decree terms—including residency, donation, employment, or property requirements
• Material misrepresentation in the application or annual filings
• Fines exceeding $10,000 per violation for specific deficiencies
• Automatic fines starting at $1,000 for failure to file (effective January 15, 2026)

Revocation Procedure

• DDEC issues a deficiency notice identifying the compliance failure
• The decree holder is given an opportunity to cure the deficiency within a specified period
• If the deficiency is not cured, DDEC may issue a formal revocation order
• The decree holder may appeal the revocation through administrative channels

Tax Reversion After Revocation

When a decree is revoked, the tax benefits are retroactively eliminated. This means:

• Puerto Rico taxes at standard rates apply for the entire period the decree was in effect—including the standard corporate tax structure (20% normal tax plus graduated surtax, combined maximum 37.5%) for Chapter 3 holders
• Interest and penalties accrue on the unpaid tax differential
• Federal reassessment—the IRS may also reexamine your federal returns if your decree status changes

Tax Reversion After Decree Expiration

When a decree expires (and is not renewed), income earned after expiration reverts to standard Puerto Rico tax rates. The local tax rates that apply after expiration depend on the type of income and the current Puerto Rico tax code. Decree holders should plan for this transition well in advance of expiration.

DDEC-IRS Information Exchange

DDEC and the IRS exchange information about decree holders. A DDEC revocation or compliance finding can trigger an IRS examination. Approximately 1,800 decree holder audits were underway or completed in 2025, reflecting the coordinated enforcement posture between the agencies.

How to Prevent Revocation

• Maintain compliance year-round—don’t wait for a deficiency notice
• Engage a CPA and attorney to ensure all filings, certifications, and donations are timely
• Respond immediately to any DDEC communication or deficiency notice
• Document everything—residency records, donation receipts, employment records, and annual report submissions