If saving big on income taxes while soaking up the sun on a U.S.-owned Caribbean island sounds like a dream life to you, relocating to Puerto Rico under the Act 60 tax exemptions may be right for you. Thousands of Americans have already made the move to Puerto Rico, enjoying a 0% income tax rate on capital gains or a 4% corporate tax rate for their business while indulging in the excitement of Puerto Rican culture and cuisine. But to those considering taking advantage of Puerto Rico’s generous tax exemptions without committing to a life on the island, be warned: Integrating into Puerto Rican life isn’t just a bonus. It’s a requirement.
Puerto Rico offers a myriad of tax incentives, but they all entail the same goal for the government: boosting Puerto Rico’s economy by attracting to the island high-net-worth individuals who will invest in the infrastructure. Thus, to reap the benefits of the ever-popular Act 60 Export Services and Individual Resident Investor tax exemptions, you must hold up your end of the bargain and settle into a life in Puerto Rico. Bona fide residency is the benchmark to determine commitment to the island, and it is measured by three tests: the presence test, the tax home test, and the closer connection test. All three are easy to satisfy if you truly commit to a new life in Puerto Rico.