How to Apply for an Act 60 Decree: Overview of the Application Process

Overview of the Act 60 Application Process

Applying for an Act 60 decree involves multiple steps including eligibility evaluation, documentation preparation, entity formation, application filing, and DDEC review. The process generally takes several months from initial planning to decree issuance.

Recent Changes

Individual Investor applicants filing on or before December 31, 2026 may qualify for grandfathered rates under Section 2022.01(a). Applications from January 1, 2027 onward are generally subject to a 4% flat rate on passive income under Section 2022.01(b).

Additionally, for applications submitted after December 31, 2026, applicants are generally required to demonstrate that they were not residents of Puerto Rico for at least six years prior to relocating (Section 1020.02(a)(4), as amended by Ley 38-2026).

Determining the Applicable Chapter

Chapter 2 (Individual Investor)

Designed for individuals establishing bona fide residency in Puerto Rico. Potential benefits include preferential rates on investment income. Bona fide residency is determined under IRS IRC Section 937 (physical presence, tax home, closer connection).

Chapter 3 (Export Services)

Designed for businesses providing services primarily to clients outside Puerto Rico. Qualifying businesses may be eligible for a 4% corporate rate on export services income (Section 2032.01(a)).

Chapter 6 (Manufacturing)

Designed for manufacturing operations in Puerto Rico. May provide preferential rates on industrial income plus property tax and import duty considerations.

Documentation Generally Required

Universal Documents

• Valid identification
• Personal financial statements
• Tax returns (typically multiple years)
• Background certifications
• Evidence of financial capacity

Chapter-Specific Documents

Chapter 2: Evidence supporting the intent to establish bona fide residency, investment portfolio documentation, charitable donation plan (Section 6020.10(b) requires $10,000 annual minimum with specific allocation)

Chapter 3: Corporate formation documents, financial statements, client contracts demonstrating export orientation, business plan, employee hiring plan

Chapter 6: Industrial plan, investment commitment documentation, feasibility studies, environmental considerations, employment and training plans

Entity and Legal Setup

Applicants generally need to establish a legal presence in Puerto Rico, which may include:

• Entity formation (corporation, LLC, or other structure appropriate to the chapter)
• Puerto Rico bank accounts
• Physical office address (P.O. boxes generally do not satisfy this requirement)
• SURI registration with Hacienda

Application Filing

The application is filed with DDEC and typically includes the general application form, chapter-specific forms, sworn statements, and the business or investment plan. Government filing fees apply and vary by chapter and decree type.

Note on costs: Total costs for the application process (including government fees, professional services, and related expenses) vary significantly depending on the chapter, complexity of the application, and professional services engaged. Prospective applicants are encouraged to obtain specific cost estimates from their professional advisors.

DDEC Review Process

The DDEC review generally involves multiple phases:

Initial Review: Documentation completeness and basic eligibility verification. DDEC may request additional information, typically with a 30-day response window.

Technical Review: Specialized teams evaluate financial viability, regulatory compliance, operational feasibility, and fiscal impact. This phase typically takes several weeks.

Final Review and Approval: Senior review and approval by DDEC leadership, followed by official decree preparation.

Timeline Considerations

The total process from initial planning to decree issuance generally takes 4-8 months, depending on:

• Completeness of the initial application
• Complexity of the business structure
• Responsiveness to information requests
• Current DDEC processing volume

Post-Approval Obligations

Once a decree is granted, ongoing compliance obligations begin:

• DDEC annual compliance report by November 15 (Section 6020.10(a)(3))
• Annual filing fee of $5,000 (Section 6020.10(d))
• Chapter-specific requirements (employment, export ratio, residency, charitable contributions)
• Federal and PR tax filings
• Maximum administrative fine for non-compliance: $10,000 (Section 6020.10(e))

Communication During the Process

Maintaining organized, written communication with DDEC throughout the process is generally advisable. All information requests should be responded to within stated deadlines. Professional representation (attorney or CPA experienced with DDEC) is commonly engaged for the application process.

Frequently Asked Questions

How long does the application process take? Generally 4-8 months from filing to decree issuance, depending on complexity and completeness.

What are the fees involved? Government filing fees, professional service fees, and related costs vary by chapter and circumstances. Specific estimates should be obtained from professional advisors.

Can an application be denied? Yes. DDEC may deny applications that do not meet eligibility requirements or provide insufficient documentation. Working with experienced professionals may help ensure complete and well-prepared applications.

What happens after the decree is approved? Ongoing compliance obligations begin, including annual DDEC reporting, tax filings, and meeting all decree-specific requirements.

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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.