Keeping your Act 60 decree means meeting ongoing obligations every year: filing an annual report, paying an annual fee, making a required charitable donation to Puerto Rico nonprofits (historically around $10,000/year), buying residential property in Puerto Rico within two years of your decree, and maintaining the 183-day presence plus filing PR tax returns. The IRS actively audits these claims, so compliance must be real.
Key takeaways
A decree is not permanent on its own: you must satisfy annual requirements to keep it.
Obligations include an annual report, an annual fee, and a charitable donation (historically around $10,000/year).
You must purchase residential property in Puerto Rico within 2 years of obtaining the decree.
You must maintain 183 days of presence and file Puerto Rico returns.
The IRS actively audits Act 60 claims, focusing on income-sourcing and genuine residency.
What are the annual requirements to keep an Act 60 decree?
A decree grants the tax benefits, but those benefits depend on ongoing compliance. For individual decree holders, the recurring obligations typically include several distinct items.
You generally must file an annual report, pay an annual fee, and make a required annual charitable donation to Puerto Rico nonprofits, historically around $10,000 per year. You must also continue meeting the 183-day presence requirement and file your Puerto Rico tax returns.
These are not one-time steps. They repeat every year for as long as you hold the decree, and missing them can jeopardize your benefits.
What is the home-purchase requirement?
Beyond the annual items, there is a property requirement tied to your decree. You must purchase residential property in Puerto Rico within two years of obtaining your decree.
For relocators targeting Dorado Beach, this requirement usually overlaps with their plans anyway. Buying in communities such as Plantation Village, The Greens, or a Ritz-Carlton Reserve Residence both satisfies the rule and establishes a genuine home base. Just be mindful of the two-year window so the purchase happens on time.
What does the annual checklist look like?
Requirement | What it involves | Timing |
|---|---|---|
Annual report | File required report with authorities | Yearly |
Annual fee | Pay the required fee | Yearly |
Charitable donation | Donate to PR nonprofits (historically ~$10,000) | Yearly |
Residential property | Purchase a home in PR | Within 2 years of decree |
Presence | Maintain 183 days in PR | Each tax year |
Tax filings | File PR tax returns | Yearly |
Why does the IRS scrutinize Act 60 so closely?
The benefits are significant, which is precisely why they attract attention. The IRS actively audits Act 60 claims, and two areas draw the most focus.
The first is income-sourcing: whether the gains you are treating as Puerto Rico-sourced are genuinely so. The 0% (or 4%) treatment applies to income that truly qualifies, not to mainland-sourced income relabeled to look local.
The second is genuine residency: whether you actually live in Puerto Rico as your bona fide home. Auditors look for the same markers as the residency tests, including days present, where your business operates, and where your life is centered.
What are the most common Act 60 compliance mistakes?
Treating residency as a formality. Spending too little time on the island, or keeping your real life on the mainland, undermines the closer-connection and presence tests.
Missing the property deadline. Forgetting the two-year window to purchase residential property in Puerto Rico is an avoidable but serious slip.
Skipping the annual donation, report, or fee. These recur every year. Treating them as one-time tasks can lead to lapses.
Mischaracterizing income. Claiming 0% or 4% treatment on income that is not genuinely Puerto Rico-sourced is a primary audit trigger.
Poor recordkeeping. Without clear documentation of days present, filings, donations, and the property purchase, defending a decree under audit becomes much harder.
How do you stay compliant year after year?
The most reliable approach is to build a recurring system. Track your days in Puerto Rico carefully, calendar the annual report, fee, and donation, and confirm the property purchase happens within two years.
Work with a licensed Puerto Rico CPA or tax attorney to keep your filings and income-sourcing clean. Good records and professional guidance are your best defense if the IRS ever asks questions.
Frequently asked questions
Is the Act 60 decree permanent once granted?
No. You must meet annual requirements, including reports, fees, donations, the 183-day presence, and tax filings, to keep the benefits.
How much is the Act 60 charitable donation?
Historically it has been around $10,000 per year to Puerto Rico nonprofits, though exact amounts can change, so confirm current figures with a professional.
Do I really have to buy a home in Puerto Rico?
Yes. Decree holders must purchase residential property in Puerto Rico within two years of obtaining the decree.
Will the IRS audit my Act 60 claim?
The IRS actively audits Act 60 claims, focusing on income-sourcing and genuine residency, so your compliance and records must be real and well documented.
What happens if I miss an annual requirement?
Missing obligations can jeopardize your decree and benefits. If you fall behind, consult your Puerto Rico tax professional promptly.
This article is general information, not tax or legal advice. Rules and figures can change. Consult a licensed Puerto Rico CPA or tax attorney before acting.