Puerto Rico’s Act 60, also known as the Incentives Code of Puerto Rico, is one of the most attractive tax frameworks in the world for manufacturing and export companies. Designed to promote economic growth, it offers powerful tax incentives to encourage businesses to establish operations on the island.
Manufacturers who relocate or expand under Act 60 enjoy reduced corporate tax rates, property tax exemptions, and significant savings on dividends and export income. This makes Puerto Rico a prime destination for global businesses seeking a competitive edge in production and distribution.
Understanding Puerto Rico’s Act 60
History and Purpose
Act 60 was enacted in 2019, consolidating various incentive laws like Act 20 (Export Services Act) and Act 22 (Individual Investors Act) into a single framework. Its mission is clear — to position Puerto Rico as a global hub for innovation, manufacturing, and export-driven industries.
Why It Matters for Manufacturers
The manufacturing sector forms the backbone of Puerto Rico’s economy. Through Act 60, the government aims to attract new factories, create jobs, and foster technological development while boosting exports to global markets.
Act 60 Benefits for Manufacturers
Manufacturing businesses under Act 60 receive several tax privileges that can dramatically reduce operating costs and enhance profitability.
4% Corporate Tax Rate
Eligible manufacturing companies enjoy a 4% flat income tax rate — a massive reduction compared to the U.S. mainland’s 21% federal corporate tax. This low rate gives Puerto Rico-based manufacturers a competitive advantage globally.
100% Exemption on Dividends
Shareholders benefit from a 100% tax exemption on dividend distributions, meaning profits can be reinvested or distributed without double taxation — a major incentive for long-term investors.
Property Tax Exemptions
Manufacturing entities enjoy 75% to 100% property tax exemptions, covering land, buildings, and machinery used in production. These savings significantly lower fixed costs and improve capital efficiency.
Eligibility for Manufacturing Services Under Act 60
To qualify, a company must engage in eligible manufacturing activities that contribute to Puerto Rico’s economic development.
Qualified Activities Include:
Industrial or commercial product manufacturing
Biopharmaceutical production
Medical device and electronics fabrication
Software and hardware assembly
Renewable energy component manufacturing
Both local and export-oriented manufacturers can qualify, provided they meet employment and compliance criteria.
Export Manufacturing Incentives
Export manufacturers receive additional benefits under Act 60. If a company produces goods in Puerto Rico and sells them to clients outside the island, it qualifies for export service incentives. This dual qualification offers even greater savings, particularly for global firms in biotech, electronics, and aerospace industries.
Act 60 encourages companies to establish high-value manufacturing operations that enhance Puerto Rico’s global export footprint.
How to Apply for Act 60 Tax Benefits
Application Steps:
Register your business in Puerto Rico.
Submit an Act 60 decree application to the Department of Economic Development and Commerce (DDEC).
Provide documentation, including financial projections, corporate structure, and compliance plans.
Await review and approval, typically completed within 90 to 120 days.
Once approved, your company receives a 15-year tax decree, renewable for another 15 years, guaranteeing consistent tax benefits.
Maintaining Compliance
After approval, companies must comply with Act 60’s ongoing requirements:
Annual economic activity reports
Minimum job creation commitments
Regular tax filings and compliance certifications
Failure to maintain these obligations may result in penalties or revocation of benefits. Working with experienced tax attorneys ensures full adherence to Act 60 guidelines.
Role of Tax and Legal Professionals
Navigating Act 60’s application process and compliance requirements can be complex. Professional advisors provide:
Legal entity structuring
Decree application preparation
Tax planning and accounting support
Long-term compliance management
Their expertise ensures companies maximize benefits while avoiding potential pitfalls.
Real-World Success Stories
Many multinational corporations and startups have thrived under Act 60. The program has attracted industries like pharmaceuticals, medical devices, and electronics manufacturing — all benefiting from lower taxes and a skilled local workforce.
These companies not only save millions annually but also contribute to local job creation and economic revitalization.
The Future of Manufacturing in Puerto Rico
Puerto Rico is emerging as a manufacturing powerhouse in the Caribbean. With Act 60 offering long-term tax stability and access to U.S. markets, more investors are viewing the island as a strategic production base. As global trade evolves, Puerto Rico’s combination of U.S. legal protection and global incentives positions it perfectly for the next wave of manufacturing innovation.
Conclusion
The Tax Benefits Act 60 represents one of the most powerful opportunities for manufacturers seeking to expand efficiently and legally within a U.S. jurisdiction. Its low tax rates, generous exemptions, and pro-business environment make Puerto Rico an ideal destination for both startups and established corporations.
For companies ready to scale globally, Act 60’s manufacturing incentives provide the foundation for long-term success and sustainability.
FAQs
1. What is Act 60 in Puerto Rico?
Act 60 is a comprehensive incentives law that offers tax benefits to businesses and investors operating on the island, particularly in manufacturing and export sectors.
2. Who qualifies for manufacturing tax benefits under Act 60?
Any company engaged in eligible manufacturing, industrial, or technological production in Puerto Rico can qualify.
3. How much can a company save under Act 60?
Businesses enjoy a 4% corporate tax rate, up to 100% property tax exemptions, and complete dividend exemptions — resulting in major savings.
4. What are the compliance requirements?
Companies must maintain employment levels, submit annual reports, and comply with DDEC’s guidelines to retain benefits.
5. Is Act 60 still active for new applicants?
Yes, Act 60 remains open for qualified applicants and continues to attract new investors and manufacturers to Puerto Rico.