PUERTO RICO Trends and Developments Contributed by: Anthony O. Maceira Zayas, Simón Carlo Valentín and Carlos M. Fontán, Maceira Zayas
(b) Benefits run until 31 December 2055 (c) Subject to the new six-year prior non-residency rule (d) 4% preferential rate on post-relocation interest, dividends and capital gains recognised before 1 January 2056; 5% rate on pre-relocation appreciation recognised after ten years and before 1 January 2056; ordinary Puerto Rico rates otherwise; more favourable rate applies if otherwise available under law. (e) The prior non-residency requirement is now a six-year look-back period from the date of ap - plication. (f) The incentive always required the acquisition of a primary residence in Puerto Rico, but Act 38-2026 modified the requirement to limit the ownership of the primary residence to the grantee individually, jointly with their spouse, or through an eligible trust. DDEC Tightens Compliance Enforcement Across All Decree Programmes Puerto Rico’s Department of Economic Development and Commerce (DDEC), the agency that issues and oversees Act 60 decrees through its Office of Incen - tives (OI), has shifted its operational focus from decree approval and issuance to active compliance enforce - ment, a change that makes active compliance a more immediate practical concern for decree holders than at any prior point in the programme’s history. For most of the programme’s existence under Acts 20 and 22 and their successor Act 60, annual compliance report - ing requirements covered only five programme cate - gories, and enforcement actions were rare; the current administration has expanded mandatory reporting to 15 categories and established a dedicated audit and revocation process. In 2025, the OI audited 1,798 decrees covering both resident individual investors and export services businesses, issuing 305 defi - ciency notices, 147 to individual investors and 158 to export services businesses, each carrying a fine of up to USD10,000. Four decrees were formally revoked for non-compliance with decree terms, 19 were annulled, and more than 887 holders surrendered their decrees voluntarily. For 2026, DDEC has announced sample-based audit campaigns covering all industries under Act 60, auto -
mated deficiency notices for late annual report filings after 15 January 2026, and automatic fines begin - ning at USD1,000 per violation escalating to poten - tial decree revocation. Some of the new programme categories facing added annual reporting compliance requirements include sectors such as private equity funds, tourism businesses, scientific researchers, cre - ative industries and agro-industrial operations. DDEC has also announced active co-ordination with Puerto Rico’s Department of Treasury (Hacienda) and the IRS on information sharing, and all new individual investor decree applications now require criminal background certifications from the applicant’s prior country of resi - dence; individuals with fraud or felony convictions are ineligible. On 11 March 2026, DDEC issued Administrative Order No. 2026-002, directed specifically at private equity funds ( Fondos de Capital Privado ) operating under Act 60 decrees. The order addresses practices the agency had identified as potential abuse vectors: capital recycling through related-party loans, in-kind contributions of securities designed primarily for tax benefit rather than genuine investment, and the use of fund capital to extend loans to individual investors. The key operational rules under the order are: • In-kind contributions of securities must remain in the fund, or an equivalent cash amount must be reinvested, for a minimum of 24 months from the date of contribution. • Investments in entities related to an investor hold - ing 20% or more in the fund require documented economic justification demonstrating new activity, operational expansion or job creation. • The tax deduction base for an investor who takes a fund loan within 120 days of contributing is reduced by the loan amount. Some practitioners have questioned whether the order was issued through the appropriate process to give it binding regulatory effect under Puerto Rico’s adminis - trative law framework, but until it is challenged and set aside by a court of competent jurisdiction, the order remains operative and DDEC continues to apply it. The Government Accountability Office (GAO) report released on 8 December 2025, GAO-26-107225,
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