“In America there are two tax systems, one for the informed and one for the uninformed. Both systems are legal.”
U.S. Appeals Court Justice, Learned Hand (1935)
Puerto Rico’s Act 60: When Are Pre-Move Bitcoin Gains Taxed?
Cryptocurrency investors relocating to Puerto Rico frequently ask whether Bitcoin gains accrued before their move can qualify for Act 60’s favorable tax treatment. The answer depends on complex sourcing rules that distinguish between appreciation occurring before and after establishing bona fide Puerto Rico residency. This article analyzes the tax treatment of pre-move Bitcoin gains, discusses the relevant statutory framework, and outlines key considerations for crypto investors seeking to maximize Act 60 benefits. Read more.
Posted on June 15, 2026
Puerto Rico Act 60: Taxation of Pre-Residency Property Appreciation
Many taxpayers assume that moving to Puerto Rico under Act 60 allows them to eliminate tax on future capital gains. However, special sourcing rules apply to appreciated property owned before becoming a bona fide resident of Puerto Rico. This article explores how pre-residency appreciation is treated for U.S. tax purposes, why gains accrued before the move generally remain taxable by the United States, and the planning opportunities and limitations taxpayers should understand before relocating. Read more…
Posted on June 15, 2026
Tax Court Rules Against Puerto Rico Act 60 Resident: The Three-Year Trap That Can Cost You Everything
A recent Tax Court decision highlights a critical but often overlooked requirement for taxpayers moving to Puerto Rico under Act 60. While many individuals focus on meeting the bona fide residency tests in the year of their move, special sourcing rules may continue to subject certain gains to U.S. taxation if the three-year residency requirement is not satisfied. This article examines the court’s ruling, the tax consequences of failing the rule, and planning considerations for Act 60 participants. Read more…
Posted on June 15, 2026
Statute of Limitations for Bona Fide Residents of Puerto Rico
Over the past 12 years, during seminars, speaking engagements, and in prospective client meetings regarding Puerto Rico’s Act 60 program, a question that we receive quite often is: “How long do I need to be concerned about the IRS examining my US tax return?” Read more…
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Posted on August 24th, 2025
The “Presence Test” for Bona Fide Residency in Puerto Rico
Bona Fide Resident of Puerto Rico
As we have discussed in previous articles, to be considered a bona fide resident of Puerto Rico, an individual must meet (i) a presence test, (ii) a tax home test, and (iii) a closer connection test. In this article we will focus on the presence test. Read more…
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Posted on January 20th, 2025
After Puerto Rico: Is Expatriation Worth Considering?
For some Act 60 participants, growing old in Puerto Rico is not a realistic part of the long-term plan. Few people relish the thought of returning to the mainland U.S. tax system after enjoying the enviable Act 60 tax benefits. In some instances, a return to the mainland U.S. tax regime is simply unimaginable, and quite a few individuals explore renouncing their U.S. citizenship. Read more…
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Posted on June 22nd, 2024
Pre-Move Transfer Of Property To A Partnership
Facts
Amy is a U.S. citizen who lives in the United States. Amy owns shares of marketable stock (the “SHARES”) that have appreciated in value. The SHARES have a value of $22,000,000, and Amy’s basis in the SHARES is $2,000,000. If Amy were to sell the shares, she would recognize a gain of $20,000,000. Read more…
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Posted on June 22nd, 2024
Three Year Residency Requirement For Year of Move To/From Puerto Rico
Bona Fide Resident General Rules
To qualify as a bona fide resident of Puerto Rico, an individual generally must meet a presence test, a tax home test, and a closer connection test. Read more…
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Posted on June 22nd, 2024
Living Trusts for Bona Fide Residents of Puerto Rico – Is Your Living Trust a Foreign Trust for U.S. Tax Purposes?
Individuals who move to Puerto Rico to avail themselves of Act 60 benefits often hold their assets through a living trust. Holding assets through a U.S. living trust may raise complex U.S. tax issues for bona fide residents of Puerto Rico. Read more…
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Posted on June 22nd, 2024
FICA Taxes for Bona Fide Residents of Puerto Rico
Facts (the “Base Case”)
Katy is a U.S. citizen who is a bona fide resident of Puerto Rico. Katy owns 100% of a Puerto Rican LLC (“PRLLC”). PRLLC is classified as a corporation for both Puerto Rican and U.S. tax purposes. Read more…
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Posted on June 22nd, 2024
Your Final Year in Puerto Rico
Puerto Rico’s Act 60 program has seen more than five thousand U.S. taxpayers move to the island since the program’s inception in 2012 to take advantage of the once-in-a-lifetime tax benefits offered by Puerto Rico. Eventually, many of these taxpayers will return and transition back to life on the mainland. Read more…
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Posted on June 22nd, 2024
Federal Tax Credit for Solar Panels in Puerto Rico? Not So Fast.
Warm breezes, white sand, stunning sunsets. These are the images most people conjure when thinking of Puerto Rico. They often overlook the unwelcome and frequent power outages that seem to accompany every major storm and sometimes happen without explanation. The electric grid has one major power line which, if compromised, can bring down the entire power system. Read more…
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Posted on June 22nd, 2024
The Corporate Transparency Act of 2024 and Bona Fide Residents of Puerto Rico: What You Need to Know
The Corporate Transparency Act of 2024 (CTA) is being heralded as a game changer in the fight against financial crime. Effective January 1, 2024, the CTA mandates the creation of a national database exposing the true owners of US companies and companies authorized to do business in the US, known as beneficial owners (BOs). Read more…
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Posted on June 22nd, 2024
Form 5471 Filing Requirements for Residents of Puerto Rico
This memorandum discusses the Form 5471 filing requirements for a bona fide resident of Puerto Rico (the “BFR of PR”) with respect to a Puerto Rican corporation (“PRCo”).Read more…
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Posted on June 25th, 2023
Sourcing Capital Losses Generated by a Resident of Puerto Rico
Facts
Individual A is a US citizen who is a bona fide resident of Puerto Rico with a tax home in Puerto Rico. Under Act 60 (formerly Act 22), capital gains recognized by Individual A are excluded from Puerto Rican taxable income.
Act 60–2019, known as the Puerto Rico Incentives Code, was signed into law on July 1, 2019, with an effective date of January 1, 2020 ( “Act 60”). Act 60, among other things, consolidated various tax decrees, including Act 20, the Promotion of Export Services Act, and Act 22, the Act to Promote the Relocation of Individual Investors to…read more
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Posted on May 14th, 2023
Establishing a Branch in Puerto Rico: An Often Neglected Tax Structure
When moving to Puerto Rico to participate in the Act 60 program, many taxpayers establish a Puerto Rico LLC to conduct operations. In our experience, this is not always the most efficient tax structure, and many times can lead to a multitude of nasty U.S. tax issues that a taxpayer and their advisor have not contemplated. Many times, having your current U.S. company establish a branch in Puerto Rico is…read more
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Posted on May 14th, 2023
Interest Expense Allocation For Bona Fide Residents of Puerto Rico
U.S. income tax is generally imposed on taxable income. Taxable income is defined as gross income minus certain deductions.
For example, business income of an individual starts with gross income. The gross income can then be reduced by certain trade or business expenses, interest expense, losses, bad debt expense, depreciation, etc…read more
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Posted on March 25th, 2023
Errors in IRS Publication 1321 Regarding the Allocation and Apportionment of Charitable Contributions for Residents of Puerto Rico
Bob is a U.S. citizen and bona fide resident of Puerto Rico for the entire year. This year Bob earned $24,000 from Puerto Rico sources and $96,000 from U.S. sources. All of the income earned was compensation for services. Bob itemizes deductions, and…read more
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Posted on March 25th, 2023
Compliance Alert- U.S. Withholding on Payments to Puerto Rican Persons/Entities & Other Information Reporting Requirements
Many Puerto Rico Act 60 companies and individuals holding export service decrees receive service fees from U.S.-based companies. The U.S. companies paying these fees may be unpleasantly surprised when the IRS assesses them with a 30% tax on the total fees paid to the Puerto Rican service provider for failure to comply with U.S. information reporting and withholding requirements. Read more…
To view a PDF, please click here.
Posted on June 20th, 2022
Sourcing of Income to California and “Economic Nexus” Consequences for Nonresidents
When it comes to the taxation of nonresidents, the California tax agencies—the Franchise Tax Board and the Office of Tax Appeals (“OTA”)—have held that a nonresident business owner, who never set foot in California (hereafter, the “State”), owed personal income taxes to the State. This is based on application of rules that look to the place where customers receive the benefit of services, not where services are performed. These rules differ greatly from the state sourcing rules that apply to income of employees from employment. Read more…
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Posted on May 23rd, 2022
Longing To Spend a Summer in Europe? Tax Consequences of Working Outside of Puerto Rico for Owners of Act 60 Companies
As the COVID-19 pandemic begins to wind down and various countries throughout the world begin to open up, many of us are ready to resume overseas travel. A frequent question arises in my practice regarding the tax consequences to an Act 60 owner who desires to spend a summer in Europe with his or her family and work remotely. The results are interesting…Read more
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Posted on April 10th, 2022
Overview of Sourcing Rules for Bona Fide Residents of Puerto Rico
An individual who is a bona fide resident of Puerto Rico can generally exclude from US income his or her “income derived from sources within Puerto Rico.” Because Puerto Rican-sourced income is the only income that can be excluded, it is important to understand what income is and what income is not Puerto Rican-sourced. Read more…
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Posted on November 21st, 2021
Form 926 – One of the Most Important U.S. Tax Forms that Most Act 60 Recipients Fail to File
Question:
If a U.S. citizen forms a Puerto Rican corporation (or a Puerto Rico LLC that is taxed as a corporation for U.S. purposes) and contributes cash to the Puerto Rican corporation, is the U.S. citizen obligated to notify the IRS? Read more...
To view a PDF, please click here.
Posted on May 9th, 2021
Alert: IRS to “Campaign” into Puerto Rico; How can Taxpayers Defend?
The IRS has announced a new “Campaign.” It will focus its attention on U.S. persons who have reduced their U.S. tax burden by claiming benefits under Puerto Rico Act 22. This comes as no surprise following recent increased interest from Congress, the Treasury Department, and the IRS on the revenue lost when U.S. taxpayers relocate to Puerto Rico. Read more…
To view a PDF, please click here.
Posted on March 7th, 2021
U.S. Tax Consequences of Working in the U.S. on Behalf of Your Act 60 Company
As the IRS Campaign in Puerto Rico kicks off, now would be a good time for taxpayers to assess their past U.S. tax filings and prepare for the very real event of an IRS audit or soft letter. In our experience, there are two main areas of U.S. federal tax noncompliance that are overlooked or misunderstood by many, if not most, Act 601 residents and companies…Read more…
To view a PDF, please click here.
Posted on March 7th, 2021
Alert: Act 20/22 Taxpayers Asking Questions Following Indictment and Arrest of BDO Tax Division Head
The Department of Justice (“DOJ”) indicted and arrested the head of BDO Puerto Rico’s Tax Division for allegedly flouting rules surrounding Puerto Rico’s Act 20/22/60 tax incentive program (“Act 60”). The DOJ may now possess a list of BDO’s Act 60 clients. Read more…
To view a PDF, please click here.
Posted on December 22nd, 2020
Bona Fide Resident of Puerto Rico – Closer Connection Test
Bona Fide Resident of Puerto Rico
In general, to be considered a bona fide resident of Puerto Rico, an individual must meet (i) a presence test, (ii) a tax home test, and (iii) a closer connection test.1 In this article, we will primarily focus on the closer connection test. Read more…
To view a PDF, please click here.
Posted on December 8th, 2020
Corporate Inversions – Is Your Puerto Rico Act 60 Company Still Subject to U.S. Tax?
As the combined federal, state and local tax rates for high-income earners in many parts of the country exceed 40% (and approach or exceed 50% in states like California, New Jersey and New York), many U.S. taxpayers are looking for a less onerous tax environment in which to conduct business operations. Puerto Rico offers an attractive alternative with entity-level tax rates as low as 4%, and corresponding distributions taxed at 0% for eligible companies. Read more…
To view a PDF, please click here.
Posted on November 5th, 2020
Tax Alert: How Puerto Rico Companies Mitigate U.S. Tax Risks
You moved to Puerto Rico (PR) and set up an Act 20 or Act 73 company.1 The Company’s income is taxed at 4%, a rate that’s virtually impossible to match anywhere else (legally). But the costs to your personal mobility are significant. You generally must spend at least 183 days per year in PR. The last thing you want is to spend all that time, possibly away from your family, and not achieve the reduced tax rate. Read more…
To view a PDF, please click here.
Posted on June 7th, 2020