If you’ve ever wondered how global entrepreneurs legally reduce their tax burden while still operating within a U.S. jurisdiction, Act 60 Export Services is one of the most powerful answers. This program allows qualifying businesses in Puerto Rico to pay as little as 4% corporate tax on eligible income, which is dramatically lower than standard U.S. rates. But here’s the twist—it’s not just about paying less tax. It’s about structuring your business in a way that aligns with Puerto Rico’s economic goals while unlocking serious financial advantages.

Export services refer to services provided from Puerto Rico to clients located outside the island. That means you can live and operate in Puerto Rico while serving customers in the United States or anywhere else in the world. Whether you run a digital marketing agency, software development firm, consulting business, or financial service company, the potential benefits are substantial if you qualify.

Think of it like running a global business from a tax-efficient hub. You’re still connected to the U.S. economy, but you’re leveraging Puerto Rico’s unique tax framework to maximize profitability. That’s why this incentive has become increasingly popular among remote entrepreneurs and service-based companies.

Why Puerto Rico Created This Program

Puerto Rico didn’t create Act 60 by accident. The program is part of a long-term strategy to transform the island into a competitive business destination. By offering aggressive tax incentives, the government aims to attract high-value industries, create jobs, and stimulate economic growth.

Instead of relying solely on local markets, Puerto Rico encourages businesses to bring revenue from outside the island. This “export model” strengthens the economy while allowing companies to thrive under favorable tax conditions. It’s a win-win situation: businesses save money, and Puerto Rico gains economic activity.

For entrepreneurs, the appeal is obvious. You get access to a low-tax environment without giving up the benefits of operating within a U.S. jurisdiction. That combination is rare, and it’s exactly what makes Act 60 Export Services so powerful.

History of Act 60 (Formerly Act 20)
Transition from Act 20 to Act 60

Before Act 60 existed, Puerto Rico had a program called Act 20, which focused specifically on export services. Introduced in 2012, Act 20 quickly gained popularity among service-based businesses looking to reduce their tax burden. However, managing multiple incentive programs became complex, so the government consolidated them into a single law—Act 60—in 2019.

This consolidation didn’t eliminate the benefits. Instead, it streamlined them. Export services incentives were preserved and integrated into a broader framework that also includes individual tax benefits (formerly Act 22). The result is a more efficient system that’s easier to understand and manage.

For businesses, this transition means you still get the same core advantages, but with improved clarity and structure. It also signals Puerto Rico’s commitment to maintaining a stable and attractive tax environment for investors and entrepreneurs.

Key Changes and Improvements

Act 60 introduced several improvements over the old Act 20 system. One of the biggest changes is the standardized application process, which simplifies how businesses apply and maintain compliance. The government also strengthened oversight to ensure that participants genuinely contribute to the local economy.

Another key improvement is the integration of various incentives into one unified code. This makes it easier for businesses to explore additional benefits beyond export services, such as tax credits and industry-specific incentives.

In short, Act 60 didn’t reinvent the wheel—it made the wheel smoother, faster, and more reliable for businesses looking to operate in Puerto Rico.

Core Tax Benefits of Export Services
4% Corporate Tax Rate Explained

Let’s get straight to the headline benefit: the 4% corporate tax rate. If you’re used to U.S. corporate taxes, this number might sound almost unbelievable. In the mainland U.S., businesses typically face a federal tax rate of 21%, plus additional state taxes that can push the total even higher. Under Act 60, qualifying export service income is taxed at just 4%.

This isn’t a temporary discount—it’s a long-term incentive, often granted through a tax decree that can last up to 15 years or more. That kind of stability is crucial for businesses planning long-term growth.

But not all income qualifies. The reduced rate applies specifically to income generated from services provided to clients outside Puerto Rico. This is why proper structuring is essential. If your revenue streams are mixed or incorrectly classified, you could miss out on the full benefit.

100% Dividend Tax Exemption

Here’s where things get even more interesting. Profits generated under the export services incentive can be distributed to shareholders as tax-free dividends. That means you’re not just saving at the corporate level—you’re also avoiding an additional layer of taxation when you take money out of the business.

For business owners, this is a game-changer. In many jurisdictions, dividends are taxed separately, reducing the overall efficiency of your income. Under Act 60, that extra tax layer can disappear entirely, allowing you to retain more of what you earn.

Property and Municipal Tax Reductions

Act 60 doesn’t stop at income taxes. Businesses may also qualify for significant reductions in property taxes and municipal taxes, sometimes up to 75% or more. These savings can add up quickly, especially for companies with physical offices or real estate investments.

Lower operational costs mean higher margins, which can be reinvested into scaling your business. Whether it’s hiring more employees, expanding services, or upgrading technology, these additional savings create more room for growth.

Eligible Businesses Under Act 60
Service-Based Industries That Qualify

Not every business qualifies for Act 60 Export Services—but a wide range of industries do. Generally, the program is designed for service-based businesses that generate revenue from outside Puerto Rico.

Examples include:

Consulting and advisory services
Marketing and advertising agencies
Software development and IT services
Financial services and asset management
Engineering and architectural services

The key requirement is that your clients must be located outside Puerto Rico. This ensures that your business is bringing new money into the local economy rather than circulating existing funds.

Remote and Digital Businesses

In today’s digital world, many businesses operate entirely online. This makes Act 60 particularly attractive for remote entrepreneurs. If you run a location-independent business, relocating to Puerto Rico can unlock significant tax advantages without disrupting your operations.

Think about it—your clients don’t care where you’re based as long as you deliver results. By moving your base to Puerto Rico, you can maintain your global reach while benefiting from a more favorable tax structure.

Requirements to Qualify for Act 60 Export Services
Operating Outside Puerto Rico

To qualify, your services must be exported. That means your customers or clients must be located outside Puerto Rico. If a significant portion of your revenue comes from local clients, you may not qualify for the full benefits.

Local Employment Requirements

Businesses are generally required to hire at least one local employee. This requirement ensures that the program contributes to job creation on the island. Depending on your business size and structure, additional employment requirements may apply.

Office and Physical Presence Rules

You must establish a physical presence in Puerto Rico, which typically includes:

Leasing or owning office space
Maintaining operational activities on the island
Demonstrating real business activity

This isn’t a “paper company” setup. The government expects genuine economic participation.

Step-by-Step Application Process

Applying for Act 60 Export Services involves several steps, including business formation, submitting an application, and obtaining a tax decree. While the process is straightforward in theory, it requires careful documentation and planning.

Most applicants work with legal and tax professionals to ensure compliance. This helps avoid delays and increases the likelihood of approval.

Costs and Compliance Obligations

Participating in Act 60 isn’t free. Businesses must pay:

Application fees
Annual compliance fees
Costs related to maintaining operations

You’ll also need to file annual reports and meet ongoing requirements. Failing to comply can result in losing your tax benefits.

Comparing Act 60 vs Mainland U.S. Taxes
Tax Category    Mainland U.S.    Act 60 Export Services
Corporate Tax    21%+    4%
Dividend Tax    Taxable    0%
Property Tax    Standard Rates    Reduced
Municipal Tax    Applicable    Reduced
2026 Deadline and Future Changes

Puerto Rico has introduced a key deadline: businesses that apply before December 31, 2026, can secure the most favorable terms. After that, changes may impact new applicants, making early action essential.

Advantages and Disadvantages

Act 60 offers incredible tax savings, but it also requires relocation, compliance, and lifestyle adjustments. For many entrepreneurs, the benefits outweigh the challenges—but it’s not the right fit for everyone.

Who Should Consider Act 60 Export Services

This program is ideal for:

Remote business owners
Consultants and freelancers
Tech entrepreneurs
Financial service providers

If your income is location-independent, Act 60 can significantly improve your bottom line.

Common Mistakes to Avoid

Common pitfalls include failing to meet residency requirements, misunderstanding income sourcing rules, and neglecting compliance obligations. These mistakes can be costly, so proper planning is essential.

Conclusion

Act 60 Export Services is one of the most powerful tax incentives available within a U.S. jurisdiction. With a 4% corporate tax rate, tax-free dividends, and additional exemptions, it offers a compelling opportunity for service-based businesses. However, success depends on proper structuring, compliance, and long-term planning.

FAQs
1. What is Act 60 Export Services?

It’s a Puerto Rico tax incentive offering a 4% corporate tax rate for businesses providing services outside the island.

2. Who qualifies for Act 60?

Service-based businesses with clients outside Puerto Rico that meet residency and operational requirements.

3. Do I need to move to Puerto Rico?

Yes, business owners typically need to establish residency to maximize benefits.

4. Are dividends really tax-free?

Yes, qualifying dividends under Act 60 can be distributed tax-free.

5. Is Act 60 still available after 2026?

Yes, but terms may change, making early application advantageous.