The Benefits of Investing and Living in Puerto Rico
Puerto Rico can be a special place for real estate investors. Not only is it a beautiful island, but it also offers some of the best tax breaks in the U.S. If you want to lower your taxes, keep more of your profits, and invest in a growing market, Puerto Rico has a lot to offer.
The local government has created many programs to attract investors, and some of these programs are not found anywhere else in the United States. In this guide, you’ll find out about the main tax incentives available for real estate investors in Puerto Rico and how they can help you.
Act 60: The Main Tax Incentive Law
In 2019, Puerto Rico combined many different tax laws into one more comprehensive law called Act 60. It includes several popular programs:
Individual Resident Investor (Old Act 22)
If you move to Puerto Rico and become a resident, you can pay zero taxes on capital gains that you make after you move. That means if you buy a property after moving here and sell it later for a profit, you don’t pay any Puerto Rico or U.S. federal capital gains tax on your profit.
- Who is this for? People willing to live in Puerto Rico for at least 183 days a year.
- Main benefit: 0% tax on capital gains, interest, and dividends earned after you move.
Export Services (Old Act 20)
If you start a Puerto Rican business that offers services to clients outside of Puerto Rico, your company pays only 4% in corporate taxes (much less than in the U.S.).
- Who is this for? Business owners with clients outside Puerto Rico, which can include real estate managers or developers with U.S. or overseas clients.
- Main benefit: 4% corporate tax and tax-free distributions (dividends).
Tourism Incentives
Puerto Rico encourages the development of hotels, guesthouses, resorts, and other tourism projects. If you invest in a tourism project:
- You can get tax credits worth up to 40% of the project cost. You can even sell these credits for cash.
- You may get a 90% discount on property taxes and pay zero municipal construction taxes.
Federal Opportunity Zones
Almost all of Puerto Rico is in a “Qualified Opportunity Zone,” part of a U.S. government program to help improve certain areas.
If you sell an asset for a profit (like a property in the U.S.), you can reinvest that profit in Puerto Rico through a special fund and get these benefits:
- Defer taxes: You don’t pay tax on your profit right away—you delay it.
- Reduce taxes: If you keep the investment for a few years, you may get a discount on the tax you owe.
- No tax on new gains: If you hold the investment for at least 10 years, you pay no tax on new profits from that investment.
Long-Term Rental Tax Exemptions
Puerto Rico also wants more people to offer long-term rentals. If you rent out a home or apartment for at least a year (not just as a vacation rental) in some special areas, you can get 100% income tax exemption on your rental income. This makes your rental income tax-free as long as you follow the rules.
Investment and Financial Funds
Private Equity Funds (Act 185)
If you want to pool money with other investors or raise money for a big project, you can use a Private Equity Fund (PEF). These funds get:
- Tax exemptions at the fund level.
- Investors may also get tax deductions and tax-free capital gains inside the fund, if the fund invests enough in Puerto Rico.
International Financial Entities (Act 273)
Big investment groups or family offices sometimes set up International Financial Entities (IFEs) in Puerto Rico to handle deals and lending worldwide. These pay a 4% corporate tax rate and don’t pay taxes on dividends to owners.
Special Tax Breaks for Certain Projects
Tourism Development Act (Act 74)
If you develop a big hotel or resort, you may get extra tax breaks, including long-term guarantees on your tax rate so you can plan hotel profits far into the future.
Historic Preservation Tax Credits
If you fix up a historic building (like the ones in Old San Juan) to use for business or rental:
- You can get a 20% federal tax credit for qualified repairs.
- Puerto Rico can give extra local tax credits (sometimes up to 40% of costs).
- You can sell your tax credits if you don’t need them.
Green Building and Professional Relocation
Renewable Energy and Green Buildings
If you add solar panels or other energy-saving features to your property, there are government rebates and tax credits—sometimes up to 40-50% off the cost of going solar.
“Green” buildings may also get faster permits and extra tax relief.
Professionals Moving to Puerto Rico (Act 14)
If you’re a professional, like a real estate developer or architect, and you move your practice to Puerto Rico, you may qualify for the low 4% tax rate on the money you earn from export services.
Final Thoughts
Puerto Rico offers more tax incentives for real estate investment than almost anywhere else. Whether you’re buying to rent, fixing up a classic building, or developing a new hotel, there’s a program that could help you save money and grow your wealth.
But always remember: these benefits come with rules. Make sure to follow the application steps and keep good records. Before you invest, talk to a tax expert or lawyer who knows Puerto Rico’s rules. That way, you can make the most of these unique opportunities and avoid any surprises.
Ready to explore living and investing in Puerto Rico?
