Manufacturing Incentives Under Act 60: 2026 Guide

Manufacturing Benefits Under Act 60

Puerto Rico has consolidated as one of the most attractive manufacturing destinations in the Western Hemisphere. Manufacturing sits in Chapter 6 of Subtitle B of the Incentives Code (Sections 2061.01 through 2064.01), which offers incentives that may transform an industrial operation's profitability. Chapter 4 covers a different sector, finance, investment and insurance, and is sometimes confused with manufacturing in secondary sources.

Strategic Advantages

Geographic Location

• Gateway between United States and Latin America
• Potential tariff advantages for US market access
• Proximity to Caribbean consumers
• Logistical positioning for hemispheric operations

Infrastructure

• Advanced port and airport infrastructure
• Industrial electrical grid
• Specialized industrial parks
• United States legal framework

Chapter 6 Tax Incentives

A 4% fixed preferential rate applies to Industrial Development Income for businesses holding a decree under this chapter (Section 2062.01(a)(1)). Outside a decree, a regular Puerto Rico corporation pays an 18.5% normal tax (Section 1022.01(b) of the Puerto Rico Internal Revenue Code) plus a graduated surtax reaching 19% on income above $275,000 (Section 1022.02(b)(2)), so the combined statutory rate can approach 37.5%.

Property Tax Benefits

• A 75% exemption from municipal and state property taxes on personal and real property used in the covered activity (Section 2062.02(a))
• The same 75% applies during the authorized construction or establishment period (Section 2062.02(b))

Import Duty Considerations

• Potential exemptions from certain import duties for qualifying manufacturing equipment and materials
• May apply to raw materials and components

Qualification Requirements

To potentially qualify for Chapter 6 manufacturing incentives, businesses typically need to:

• Establish physical manufacturing operations in Puerto Rico
• Meet investment thresholds
• Fulfill employment commitments
• Comply with environmental and safety requirements
• Submit regular compliance reporting

Qualifying Activities

Manufacturing activities that may qualify include physical production and assembly, processing of raw materials, industrial fabrication, research and development activities, and quality control and testing.

Sector Considerations

Electronics and Technology: High-value components may benefit most from duty exemptions. R&D credits could enhance innovation activities.

Pharmaceuticals and Medical Devices: Puerto Rico's established pharmaceutical cluster provides regulatory familiarity with FDA requirements and specialized workforce availability.

Food and Beverage Processing: Access to regional agricultural inputs and Caribbean and Latin American market opportunities.

Application Process

The typical application process may involve initial eligibility assessment, business plan development, regulatory and compliance review, formal decree application, government evaluation, and final approval.

Compliance Considerations

Manufacturers are generally expected to maintain adequate record keeping, meet employment commitments, comply with environmental requirements, and observe reporting deadlines. The DDEC annual report is generally due by November 15 for businesses on a calendar year, or the fifteenth day of the eleventh month following the close of the tax year otherwise (Section 6020.10(a)(3) of Ley 60-2019). Maximum administrative fine for non-compliance is $10,000 (Section 6020.10(e)).

Key personnel who want to be treated as bona fide residents of Puerto Rico must satisfy the presence test under IRC Section 937, which is a federal determination separate from the Act 60 decree. That test is met by satisfying any one of five alternative conditions, not by a single day count. See IRS Publication 570, Chapter 1.

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Virtus Advisory provides this content solely for informational purposes. Nothing in this article should be construed as a guarantee of any particular tax outcome, an endorsement of any specific tax strategy, or an offer to provide professional services. For personalized guidance, contact a licensed CPA or tax professional.