Act 60's 0% to 4% deadline: three CPA firms, three different dates
Puerto Rico's Act 60 passive-income rate changes for applications filed after December 31, 2026. We read Act 38-2026 and the law-firm analyses: who's grandfathered, and the 0%-through-2035 vs 4%-through-2055 math.
On a $1,000,000 year of qualifying passive income, a grandfathered Puerto Rico Act 60 Individual Resident Investor decree taxes you $0. Under the post-amendment rate, the same year costs $40,000. One application filing, on one side of one date, is worth forty thousand dollars per million per year.
The date itself is where the trouble starts. We surveyed three PR-CPA-firm write-ups and got three different cutoffs. One said "starting January 1, 2026, new applicants will face a 4% tax rate." Another said "applications submitted by December 31, 2026 lock in the existing 0% rate." A third said "anyone submitting on or after January 1, 2027, the 0% rate on passive income is replaced by a 4% preferential rate." At most one of these is right. Below is the signed statute, checked against law-firm analyses of the enacted text (sources at the bottom) rather than marketing pages.
Act 38-2026, section by section
The change is Act 38-2026, signed by Governor Jenniffer González-Colón in March 2026, amending the Puerto Rico Incentives Code (Act 60-2019). Four things happen at once, as a package, and the generous-sounding parts and the expensive parts are aimed at different people:
- The cutoff is application submission. Decree applications submitted on or before December 31, 2026 keep the current 0% structure. Applications submitted on or after January 1, 2027 fall under the new 4% regime. Submission date controls. The decree-issuance date and the date you establish residency do not.
- The new 4% rate. Post-cutoff applicants pay a 4% preferential rate on interest and dividends (amended §2022.01(b)(1)) and on post-residency capital gains recognized before January 1, 2056 (§2022.02(d)). Long-term pre-residency gains keep their existing 5% treatment (§2022.02(c)).
- The 2055 extension belongs to the new regime. The program now runs through 2055 instead of sunsetting at 2035. Read the income windows, though: the 4% rates apply to income recognized before January 1, 2056, while the grandfathered 0% rates apply to income recognized before January 1, 2036. The legislature bought the 20 extra years for the 4% class, not the 0% class.
- A six-year prior-residency bar. Post-cutoff applicants must show they were not Puerto Rico residents for at least six years immediately preceding relocation (amended §1020.02(a)(4)). This condition does not apply to applications filed on or before December 31, 2026.
The fine print: 0% ends in 2035
Most of the deadline coverage frames this as "lock in 0% forever vs. pay 4% forever." The income windows say otherwise. File before the cutoff and your 0% rate runs through December 31, 2035, nine more tax years. File after, and your 4% rate runs through December 31, 2055, twenty-nine years.
The statute does not say what happens to grandfathered decree holders on January 1, 2036, and the law-firm analyses we read do not say either. The most plausible bridge is the decree modification option under §6020.03(d), which practitioners read as letting a grandfathered holder opt into the new regime's terms (4% through 2055) rather than falling off a cliff. "Most plausible" is not "in writing," so put this question to a PR CPA before you treat the 0% rate as a thirty-year asset. On the enacted text it is a nine-year asset with an unresolved renewal clause.
Who's grandfathered
Three groups, in decreasing order of certainty:
- Existing decree holders. If you already hold a signed Act 60 Individual Resident Investor decree, your rate does not change: 0% on qualifying passive income through the end of 2035, which is the horizon your decree was issued against in the first place.
- Applications submitted before the cutoff but not yet approved. The amendment scopes by submission date, so an application filed December 15, 2026 that is approved in March 2027 gets the 0% structure. Expect clarifying regulations on this case. Until DDEC publishes them, treat it as grandfathered on the plain text and get it confirmed in writing.
- People who moved to PR before the cutoff but haven't filed. Physical residency without a filed application gets you nothing. The application, not the move, is what the amendment scopes, and your move date is irrelevant.
If you are in group 2 or 3, the practical answer is the same: file the application now rather than planning to file it.
The math, both ways
Even at 4%, Puerto Rico beats the mainland by a wide margin. US federal long-term capital gains top out at 20% plus the 3.8% Net Investment Income Tax, 23.8% combined federal, before any state tax, and California adds up to 13.3% on top. The annual delta between the two PR regimes:
| Passive income | US federal (23.8%) | PR @ 4% (post-cutoff) | PR @ 0% (grandfathered) |
|---|---|---|---|
| $500,000 | $119,000 | $20,000 | $0 |
| $1,000,000 | $238,000 | $40,000 | $0 |
| $2,000,000 | $476,000 | $80,000 | $0 |
The comparison the income windows force is 0% for nine years against 4% for twenty-nine years. On $1M/year of passive income, beating the cutoff is worth $40,000 × 9 = $360,000 through 2035, and if the §6020.03(d) modification path works the way practitioners expect, you keep the post-2035 option anyway. The post-cutoff filer gives up that $360K and takes on the six-year residency bar. For anyone with a meaningful passive book who is already planning the move, no scenario in the enacted text makes waiting past December 31, 2026 the better side of the trade.
What to do this month
If you are 0–6 months from applying, put three questions to your PR CPA in writing before signing anything:
- "Which date applies to my situation?" The CPA SERP still has at least three different answers in indexable text. Get yours in writing, citing the section of Act 38-2026 they rely on. A hedged answer tells you something too.
- "What counts as 'submitted'?" Initial DDEC filing? Filing-fee payment? Case-number receipt? Full document package? You want the earliest defensible answer, tied to a specific statutory clause. Decree review takes months and you don't control DDEC's calendar, but you control when you file.
- "What happens to my 0% rate after 2035?" Ask about the §6020.03(d) decree-modification option and whether implementing regulations have been published since this post's last update. The honest answer today is "probably bridgeable, not yet litigated." Discount a more confident answer that arrives without a statutory citation.
If you're reading this after the cutoff, the math at 4% is still excellent, and the urgency shifts to your own clock: the six-year prior-residency rule and move-date planning.
Run your own numbers, then talk to a CPA
Plug your real passive-income mix into our Act 60 vs. US comparison calculator and see the 0%-vs-4%-vs-US delta on your actual book, in dollars. The deeper sourcing story, when a gain becomes PR-source in the first place, is in our cornerstone piece on Act 60 capital-gains sourcing, and the assumptions behind every number on this page are documented on the methodology page. When you're ready for a PR CPA introduction, email us and we'll route you to a firm that has read the amendment in Spanish.
Sources
- Procopio — Puerto Rico Extends Act 60 Resident Investor Program to 2055 and Introduces New 4% Tax Regime for Future Applicants (accessed 2026-06-10)
- MZLS — Puerto Rico Act 60 Resident Investor Program Now Runs Through 2055 — But the 0% Rate Expires December 31 (accessed 2026-06-10)
- Relocate to Puerto Rico — Puerto Rico Legislature Approves Act 60 Extension and New Tax Measures (accessed 2026-06-10)
Statutory citations (§1020.02(a)(4), §2022.01(b)(1), §2022.02(c)–(d), §6020.03(d)) follow the section numbering reported in the law-firm analyses above. This post is an estimate-grade explainer, not legal or tax advice. See the disclaimer.