Comprehensive Act 60 Compliance Review for SaaS Founders

Correctly sourcing revenue is the cornerstone of Act 60 compliance for any SaaS business. The Export Services incentive requires that services are rendered to non-Puerto Rican entities and individuals. For a SaaS company, this means demonstrating that your user base and revenue streams originate from outside the island. Our comprehensive review meticulously analyzes your customer data, payment gateways, and service agreements to build a robust sourcing file, a critical component of any audit defense. We cross-reference your reported income with user location data to identify potential discrepancies that could trigger a Hacienda or IRS inquiry, ensuring your sourcing methodology is sound and defensible. The "place of consumption" for software services can be a gray area, and both the IRS and Hacienda are scrutinizing these arrangements more closely, as highlighted in recent guidance. We help you establish a clear nexus for your services outside of Puerto Rico, which may involve server log analysis, IP address geolocation, and billing address verification. This level of detail is designed to preemptively address the questions raised in reports like GAO-26-107225, which called for stricter enforcement of sourcing rules.

For SaaS companies, intellectual property is often the most valuable asset. How you hold and license this IP has profound implications for your Act 60 benefits. Transferring IP to a Puerto Rican entity must be done at fair market value to avoid transfer pricing issues, a major focus for the IRS. Our review examines your IP holding structure, licensing agreements between related entities, and royalty payments to ensure they align with arm's-length principles and IRC Section 482. We analyze the economic substance of your Puerto Rican operation to validate that it is not merely a "letterbox" entity, a key risk factor for audit. This includes evaluating the roles of your on-island employees and their connection to the IP's development and maintenance. A poorly structured IP strategy can jeopardize your entire decree, making a detailed review essential.

Qualifying as an eligible Export Service is not automatic for a SaaS business; it requires a detailed application and ongoing proof of compliance. The service must be on the DDEC's list of eligible services and performed for non-resident clients. Our AI-driven analysis verifies that your described business activities precisely match the approved service categories in your tax decree. We also review your annual reports filed with DDEC to ensure consistency and accuracy, as inconsistencies are a common red flag. Traditional CPA firms, often charging upwards of $5,000 for a manual review, can miss the nuances of SaaS business models. Our technology, processing thousands of data points, is designed to catch these specific issues, providing a level of assurance that goes beyond a standard manual check.