Tourism Incentives Under Act 60 Chapter 5: 2026 Guide

Tourism Incentives Under Act 60 Chapter 5

Act 60 Chapter 5, known as the "Visitor Economy" chapter, offers substantial incentives for qualifying tourism businesses. These provisions may provide significant tax advantages for eligible entities operating in Puerto Rico's tourism sector.

Key Potential Benefits

Qualifying tourism businesses may be eligible for:

• Income Tax Rate: Potentially as low as 4% on qualifying tourist development income
• Property Tax Exemption: Up to 75% exemption on qualifying property
• Municipal License Tax: Up to 50% exemption
• Dividend Tax: 0% on qualifying dividends distributed to individual shareholders

Eligible Tourism Activities

Hospitality and Accommodation

• Hotels (including casino operations)
• Condo hotels and resort developments
• Puerto Rican Paradores (country inns)
• Bed and breakfast establishments, guest houses
• Timeshares and vacation clubs
• Agri-lodgings (farm stays)

Experience and Recreation

• Theme parks and entertainment venues
• Golf courses (associated with exempt hotels)
• Tourist marinas and docking facilities
• Nautical tourism (yacht charters, boat rentals)
• Medical tourism facilities
• Agritourism, eSports and fantasy leagues

Marinas located in the island municipalities of Vieques and Culebra may automatically qualify as Tourist Marinas under Chapter 5.

Qualification Requirements

Entities seeking Chapter 5 benefits typically need to:

• Maintain bona fide business operations in Puerto Rico
• Demonstrate substantial tourism-related activities
• Meet minimum investment thresholds where applicable
• Comply with employment requirements
• Submit detailed business plans and financial projections

Residency Considerations for Individual Investors

Individual investors in tourism businesses may need to establish Puerto Rico tax residency. The bona fide residency determination under IRS IRC Section 937 involves the presence test, the tax home test, and the closer connection test. The presence test is satisfied by meeting any one of five alternative conditions, of which the 183-day count is only the first (IRS Publication 570, Chapter 1).

Donation Requirements

Individual decree holders under Act 60 generally contribute $10,000 annually:

• $5,000 to entities addressing child poverty (from government-approved list)
• $2,500 to other qualifying entities under Section 1101.01 of the Puerto Rico Internal Revenue Code
• $2,500 to the Fondo Especial para la Igualdad Social

Compliance and Reporting

Chapter 5 decree holders face ongoing compliance requirements including annual report submission (generally due November 15 per Section 6020.10(a)(3)), financial statements, employment verification, and investment milestone reporting. Maximum administrative fine for non-compliance is $10,000 per Section 6020.10(e).

Strategic Considerations

Tourism businesses considering Chapter 5 benefits may want to evaluate long-term investment commitments, operational scalability, market positioning within the sector, and integration with existing operations. The combination of reduced tax rates, property tax exemptions, and other benefits could provide meaningful economic advantages for eligible entities.

Given the complexity of Act 60 provisions, tourism businesses considering these benefits would generally benefit from professional guidance with eligibility assessment, application preparation, ongoing compliance, and tax planning.

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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.