Under the leadership of its new governor, Jenniffer González, the Puerto Rico government is considering a set of legislative proposals set to bring major tax changes. While the law changes have not yet been formally approved, they have reportedly strong support from local government leaders, suggesting they are likely to pass soon. We will be updating this article and notifying our mailing list as news is published.
These updates will impact investors, expatriates, and businesses relocating under Act 60 (the Puerto Rico Incentives Code), as well as those who have always lived in Puerto Rico. The goal is to balance tax benefits with fiscal sustainability and fairness. The tax reforms are projected to keep Puerto Rico attractive to investors and business owners wanting to save taxes, while creating more tax savings opportunities for Puerto Rico locals.
Here is an overview of the key changes for those using Puerto Rico’s tax incentives.
New 4% Tax for Future Act 60 Individual Investors
Introduction of the 4% Tax
A significant part of the Puerto Rico tax changes is a small increase in Act 60 investor income tax for new Investor program recipients starting January 1, 2026. The tax reforms propose to raise the current Act 60 0% tax on passive income to 4% for new Investors joining the program after 2025. These tax rates apply to Puerto Rico-sourced capital gains, interest, and dividends.
Grandfathering Existing Act 60 Recipients
Importantly, current Act 60 Investor incentive holders will keep their 0% tax rate. Those who obtain an Investor decree before the end of 2025 will not be subject to the new 4% tax. Over 4,000 investors enjoy this benefit, some still under the original Act 22 program.
Residency Requirement
Puerto Rico will add a prior residency requirement for new Act 60 applicants. Newcomers to PR must certify they have not been a resident for the 6 years prior to applying for the Investor program.
Extension of Act 60 to 2055
Another part of the Puerto Rico tax changes includes a plan to extend Act 60’s validity through 2055. Current Act 60 and Act 22 decrees are set to expire at the end of 2035, so this extension will represent a significant increase to these benefits.
It is possible that the new tax reforms will allow those decrees to be extended when they expire, but that the new 4% tax rate would apply starting in 2036. Details on this and other key points will be added as we receive them.
Continued 4% Tax Incentive for Businesses
Preservation of Core Business Incentives
Businesses relocating to Puerto Rico under Act 60 will continue to enjoy the 4% corporate income tax rate and a 100% tax exemption on Puerto Rico-sourced dividends. The new 4% tax only affects individual passive income under the Act 60 Investor program; the many business programs under Act 60 will remain unchanged.
Simplified Compliance
While no new corporate taxes were introduced, businesses must continue meeting requirements like hiring minimum staff and filing annual reports. The government also plans to simplify tax administration, including consolidating municipal sales tax (IVU) collections through the SURI system.
Tax Parity Measures and Other Reforms
Extending Low Tax Rates to All Residents
Puerto Rico proposes reducing the tax on capital gains, interest, and dividends for all residents to 4%. This move would match Act 60 benefits without requiring a special decree. If approved, this aspect of the reforms it would lower investment taxes dramatically for everyone, from the current 10%-15%.
Broader Tax Reform Package
The broader Puerto Rico tax changes come as part of a 13-measure tax reform package, supported by legislative leaders. Key reforms include:
Boosting other incentives: Extending a 10-year exemption for hospital income and rental income exemptions for residential landlords until 2040. The plan also eliminates the inventory tax on prescription medicines, helping lower consumer costs.
Encouraging savings: Increasing the deductible IRA contribution from $5,000 to $7,000 and doubling the education savings account deduction from $500 to $1,000.
Simplifying the tax code: Unifying filing dates, standardizing definitions like “LLC,” requiring consistent documentation, and consolidating filings in the SURI portal.
These reforms aim to make the system fairer, simpler, and more competitive.
Compliance and Opportunities for Investors and Expats
Act Now to Lock in 0% Benefits
For prospective Act 60 Investor program participants, the message is clear: apply before the end of 2025. Those who do can still secure the 0% tax rate on Puerto Rico-sourced gains.
Many U.S. investors are accelerating their relocation plans to Puerto Rico. Acting early allows them to be grandfathered under the more generous current rules. Those moving in 2026 or later will face the new 4% tax but will still enjoy significant tax savings compared to U.S. rates.
Increased Emphasis on Compliance
Puerto Rico is also taking compliance seriously. Adding a prior residency requirement ensures genuine relocation. Tax authorities have already increased audits and enforcement against those misusing Act 60. Past cases highlight that failing to meet requirements like the 183-day rule, $10,000 charitable donations, and annual reporting can invalidate the tax incentive contract, subjecting the taxpayer to significantly higher taxes than expected.
Why Puerto Rico Remains Attractive
Even with the new 4% tax, Puerto Rico remains highly attractive for investors. The island exempts U.S.-source income for bona fide residents, while the IRS exempts Puerto Rico-sourced income. This creates powerful tax savings.
After 2025, even without an Act 60 decree, residents may pay just 4% on capital gains, one of the lowest rates globally. Thus, Puerto Rico will likely continue drawing entrepreneurs and investors seeking significant tax advantages.
Bottom Line for 2025-2026
Puerto Rico’s 2025 tax changes mark a new era in its economic strategy. The Puerto Rico tax changes aim to preserve the island’s appeal to investors while promoting fairness and fiscal health.
The Act 60 program’s extension to 2055 provides long-term certainty. Those who act quickly in 2025 can secure 0% rates, while future applicants can still benefit from a globally low 4% rate.
Puerto Rico remains a tax-friendly destination for investors and businesses. These reforms could create a new set of opportunities, and as always, consulting a tax professional familiar with Puerto Rico law is highly recommended. Contact Puerto Rico Advantage to schedule a free consultation!
Understanding health insurance in Puerto Rico is crucial, as Puerto Rico’s health insurance system is similar to the US mainland in many ways, but there are key differences that individuals should be aware of when relocating or traveling. While conventional health insurance in Puerto Rico offers comprehensive local coverage, they often provide limited benefits outside the island. Expats, digital nomads, and frequent travelers may need to consider international health insurance options for broader coverage. For those seeking an in-depth understanding, exploring the nuances of health insurance in Puerto Rico is essential.
How is Puerto Rico’s Health Insurance Different?
Health insurance in Puerto Rico operates under a private and public healthcare system. The public system, known as Vital, is Puerto Rico’s Medicaid equivalent, covering low-income residents. The private sector includes major local providers such as Triple-S, MCS, and Humana, offering plans similar to those in the mainland U.S. but often with regional restrictions.
Most local insurance plans:
Provide full coverage within Puerto Rico
Offer limited coverage on the U.S. mainland (emergency care only)
Do not typically cover elective or routine medical care outside of PR
Because of these limitations, many professionals and retirees in Puerto Rico opt for international health insurance plans to ensure full coverage while traveling.
The Impact of Low Insurance Provider Rates on Healthcare in Puerto Rico
One of the most pressing issues in Puerto Rico’s healthcare system is the low reimbursement rates from insurance providers, which contribute to lower doctor and nurse salaries. This has led to a shortage of medical professionals, particularly among Primary Care Physicians (PCPs), as many leave for the mainland U.S. where salaries are significantly higher.
Key Statistics:
The average Primary Care Physician salary in Puerto Rico is $170,000, compared to $265,000 in the U.S.
Specialists in Puerto Rico earn $285,000, whereas in the mainland U.S., they earn around $382,000.
Registered Nurses in Puerto Rico earn an average of $35,000, significantly lower than the $81,000 U.S. average.
This shortage has resulted in:
Longer wait times for appointments, especially with specialists.
Limited availability of doctors accepting new patients.
Higher patient-to-doctor ratios, leading to potential declines in care quality.
Given these challenges, many expats and residents seek private concierge healthcare or international health insurance for greater flexibility and access to a broader network of healthcare providers.
How to Improve Your Healthcare Access and Quality in Puerto Rico
Despite the challenges, there are ways to enhance healthcare access in Puerto Rico:
Choose a Health Plan with a Strong Provider Network – Look for insurance plans that include access to top-tier hospitals and specialists to reduce wait times and ensure high-quality care.
Consider Private or Concierge Medical Services – Many expats and business professionals opt for concierge medicine, which provides direct access to physicians, personalized care, and faster appointment scheduling.
Use Telemedicine Services – Many international health plans offer telehealth options, allowing patients to consult with U.S.-based doctors remotely without needing to travel.
Supplement Local Insurance with an International Plan – For those who frequently travel or want broader coverage, international health insurance can provide access to hospitals and specialists outside of Puerto Rico.
Seek Out Medical Tourism Options – Some residents choose to receive elective or specialized medical care in Florida, Texas, or other nearby locations, where provider availability is greater and costs can be competitive.
International Health Insurance Options for Expats and Frequent Travelers
If you live in Puerto Rico and frequently travel to the mainland and/or abroad and want medical coverage in multiple locations, you might consider international health insurance plans that provide global benefits. You might find it useful to book a consultation with a Puerto Rico-based health insurance agent that can counsel you about which option works best for you. Here are some of the options available:
Final Thoughts: Finding the Right Plan for Your Needs
Understanding PR’s health insurance system is essential for both residents and expats. While local insurance plans provide strong coverage on the island, they may lack comprehensive benefits outside of Puerto Rico. For those who travel frequently or want peace of mind with global access to healthcare, an international health insurance plan may be the best choice.
However, it’s also crucial to recognize the broader healthcare challenges in Puerto Rico. Due to low provider reimbursement rates, many doctors and nurses relocate to the mainland U.S., leading to specialist shortages and longer wait times. Those moving to Puerto Rico should carefully evaluate their healthcare access options, which may include concierge medical services or international coverage for flexibility and peace of mind.
To explore your best options, consult with a licensed insurance advisor who can match you with a plan tailored to your healthcare needs.
Looking for guidance on health insurance in Puerto Rico and other relocation concerns? Contact Puerto Rico Advantage for expert insights and personalized recommendations!
Comparing the Cost of Living in PR to Major U.S. Cities
Condado neighborhood in San Juan, with combination of residential condos, hotels, restaurants, and shopping
For many individuals and businesses looking to relocate, Puerto Rico offers not just stunning beaches and a tropical lifestyle but also significant financial advantages. The cost of living in Puerto Rico is often lower than in major U.S. cities, making it an attractive destination for those seeking affordability and tax benefits. But how do everyday expenses compare, and how do tax incentives balance out living costs? Let’s break it down.
Comparing Puerto Rico’s Cost of Living to Major U.S. Cities
In general, Puerto Rico’s cost of living is lower than that of major metropolitan areas like New York, San Francisco, or Miami. While some expenses, like electricity and imported goods, can be higher, the overall affordability—especially in housing—makes Puerto Rico an attractive option. To provide an accurate comparison, we used data from sources such as Numbeo, Expatistan, and local market research as of 2024.
Budget Breakdown: Everyday Expenses in Puerto Rico
1. Housing in Puerto Rico
Bayshore Villas in San Juan’s Punta de Tierra neighborhoodHomes in Old San Juan
The cost of housing in Puerto Rico is significantly lower than in major U.S. cities. Rent for a middle-class one-bedroom apartment in San Juan’s prime locations, like Condado or Old San Juan, ranges from $1,000 to $1,500, whereas high-end apartments in these areas can exceed $2,000 per month. By comparison, similar apartments in New York or San Francisco cost over $3,000 per month.
For those looking to buy, real estate prices can be attractive, with beachfront condos available for as low as $200,000 to $400,000 in some areas. Additionally, Puerto Rico offers luxury gated communities and high-end condo buildings with extensive amenities for those seeking a more upscale lifestyle.
Tip: If you’re flexible with location, areas outside of San Juan—such as Mayagüez, Ponce, Rincón or other towns outside of the main metro area—offer lower rent while maintaining a high quality of life.
Utility costs in Puerto Rico can be higher than on the mainland due to the island’s reliance on imported fuel for electricity. The average electricity bill runs between $150 and $300 per month, depending on air conditioning use. The power grid in PR is also a bit fragile, so it is important to look into mitigation strategies such as generators and solar panels should you experience a power outage.
Tip: Solar energy is becoming more popular, and many homeowners invest in solar panels and battery backup systems to reduce electricity costs and avoid being without power. Additionally, solar panel installations may be eligible for tax credits, providing further incentives for homeowners looking to lower their energy bills.
3. Food & Groceries in Puerto Rico
Plaza de Mercado de Santurce – InteriorPlaza de Mercado de Santurce – Shoppers
Grocery prices are generally higher than in the U.S. mainland due to import costs. Expect to pay around $300 – $400 per person per month for groceries. Local markets offer fresh produce at lower prices, so shopping at farmers’ markets or buying local brands can help save money.
Tip: Opt for locally grown fruits, vegetables, and seafood to save on imported grocery costs.
4. Transportation in Puerto Rico
Old San Juan Streets at night, with Christmas decorations on display
Car ownership is common in Puerto Rico, and gas prices are comparable to mainland averages, around $4.00 – $4.50 per gallon. However, vehicle purchase prices tend to be higher due to import taxes, as there are no cars manufactured in Puerto Rico. Public transportation options are limited outside of San Juan, so having a vehicle is often necessary.
Public Transit: The Tren Urbano metro system operates in the San Juan metropolitan area but it is not as extensive as subway systems in major U.S. cities. While it provides some connectivity, most residents still rely on personal vehicles or rideshare services for daily transportation.
Tip: If living in San Juan, you can reduce costs by using Uber (currently the only rideshare app in PR) or walking. Several attractive neighborhoods allow residents to walk to most daily necessities, minimizing the need for a car.
How Tax Savings Can Offset Living Costs
One of the biggest financial incentives for moving to Puerto Rico is the potential tax savings under Act 60 (formerly Acts 20 and 22, and others). Here’s how these world-class tax incentives can benefit you:
0% Capital Gains Tax – Investors relocating to Puerto Rico can benefit from no tax on both short and long-term capital gains, compared to the 15-20% tax rate on the mainland.
2 or 4% Corporate Tax Rate – Entrepreneurs setting up qualifying businesses in Puerto Rico can enjoy a flat 2 or 4% corporate tax rate versus the 21% federal rate in the U.S.
No State Taxes – Unlike the mainland, which levies both state and federal taxes, residents of Puerto Rico are only taxed by PR for income sourced there.
For example, a business owner earning $500,000 per year could potentially save over $100,000 in taxes compared to living in a high-tax state like California or New York. (This estimate is based on Puerto Rico’s tax incentives versus combined federal and state tax rates in high-tax jurisdictions. Actual savings depend on individual circumstances, and consulting a tax professional is advised. Contact Puerto Rico Advantage to schedule a free initial consultation)
For those relocating primarily for tax benefits, Puerto Rico offers substantial savings. While some costs, like utilities and groceries, can be higher, the reduced housing costs and major tax incentives often result in a significantly improved financial outlook.
For those less concerned about affordability but looking for a transparent picture of what to expect, Puerto Rico provides a mix of high-end and budget-friendly living options. Luxury accommodations, fine dining, and premium services are available, but so are cost-saving opportunities for those who seek them.
If you’re considering a move, it’s important to weigh not just the numbers but also the lifestyle trade-offs. If you’re looking for an island paradise with financial perks, Puerto Rico may just be the perfect fit.
Need help with your move? Contact Puerto Rico Advantage for guidance on relocation, tax incentives, and settling in!
The health insurance system in Puerto Rico is very similar to the mainland US in many ways but also has some differences. Conventional health insurance plans in PR offer comprehensive local coverage but include very limited coverage outside of PR. This webinar will explain more about how the insurance system works and introduce some options to consider.
Some of the topics we will explore:
Why is Puerto Rico insurance different?
What coverage does a regular PR insurance plan offer?
If you are travelling outside of Puerto Rico, is there a way to be fully insured for any medical needs?
You may have found this site because you have heard that Puerto Rico taxes can be as low as 0%. This might sound too good to be true! We assure you that it is legitimate, and may be easier than you think, especially if you get some expert help to streamline the process.
Also, just moving to PR is not enough – you also need to apply for one or more of the PR tax incentive programs, and comply with the requirements of it.
As a US Territory, Puerto Rico has a unique status under the US tax law: income earned in Puerto Rico is taxable by PR’s IRS, not by the federal IRS. This puts PR in a unique position of being able to offer special tax incentives.
How much tax can you save?
Puerto Rico’s government has created full program of tax breaks that include:
Services businesses can pay 2-4% corporate tax, and no tax on owner distributions, if formed and operated in PR. Services can include consulting, management, among a number of other types of services.
PR Advantage has designed services packages to soften your landing in PR, helping you figure out the best tax strategy, obtain the incentives, successfully relocate to PR, and establish yourself for success from the beginning.
Free Webinar Series
We offer a webinar from time to time to provide an overview of the main questions our clients typically ask. Here are some upcoming dates that you can sign up for:
Our company helps people like you take advantage of Puerto Rico’s excellent tax incentives! We can help you determine which tax incentives are right for you, help you plan your residency and relocation strategy, and simplify the entire process for you.
Puerto Rico is a land of economic opportunity, endless beaches, a rich culture, and friendly people. The weather is amazing year-round, and Puerto Rico offers many beautiful and safe places to live. Let us help you discover the many benefits and joys that life in Puerto Rico has to offer!
Puerto Rico is in the process of implementing tax reforms that are likely to impact the Investor program. If you are considering a move to PR soon, it is beneficial to consider applying for the Investor program before the end of 2025 to lock in the current benefits.
