The Definitive Act 60 Guide for Tech Entrepreneurs

For tech entrepreneurs, the primary benefit of Act 60 is the 4% corporate tax rate on exported services income. This requires careful structuring of your business entity and operations. A Puerto Rican LLC or corporation must be established to provide services to clients outside of Puerto Rico. It is critical to properly document the services being rendered and ensure that the income is genuinely sourced to Puerto Rico. The Department of Economic Development and Commerce (DDEC) scrutinizes these arrangements, as highlighted in their Performance Evaluation reports. Our review process analyzes your corporate structure and service agreements to identify potential risks, ensuring your setup aligns with DDEC expectations and the stringent bona fide residency requirements for individuals. Traditional CPA firms may charge upwards of $15,000 for this level of analysis, but our AI-driven platform offers a more comprehensive and cost-effective solution.

IP strategy is paramount for tech companies. Under Act 60, income derived from IP developed in Puerto Rico can be eligible for the 4% tax rate. This includes software, patents, and trade secrets. However, the IP must be genuinely developed on the island, and its transfer and licensing must be handled with precision to avoid challenges from the IRS or Hacienda. The rules surrounding the sourcing of income from intangible property are complex, often involving transfer pricing studies to justify valuations. Our AI platform is designed to catch subtle errors in IP strategy that are often missed, cross-referencing your documentation against IRC Section 482 principles and relevant case law. We can help identify potential issues in your IP holding structure and licensing agreements, providing a robust defense against future scrutiny. This proactive approach is essential, as the GAO has noted increased IRS focus on Act 60 compliance (GAO-26-107225).

For startups, equity compensation is a key tool for attracting talent. Under Act 60, the tax treatment of stock options and other equity awards depends on several factors, including the timing of the grant, vesting, and exercise relative to your move to Puerto Rico. Gains from the sale of securities acquired before becoming a bona fide resident may be subject to U.S. capital gains tax on the pre-move appreciation. Our system meticulously reviews your equity compensation plans and individual grants to identify potential tax liabilities. We analyze vesting schedules and exercise dates to ensure proper sourcing of gains, helping you navigate the complexities of IRC Section 933 and the nuances of the presence and closer connection tests. This detailed analysis provides a level of assurance that goes far beyond standard compliance checks, safeguarding you from costly errors.