Puerto Rico Act 60 CPA: What Your Accountant Needs to Know to Keep the Tax Benefits

Most mainland CPAs have no working knowledge of the Puerto Rico Internal Revenue Code, which is a separate tax system from the federal code. Act 60 compliance requires filing both a federal return (Form 1040 with Forms 5471, 8938, and others depending on structure) and a Puerto Rico return (Form 482), and the interaction between the two systems is where mistakes happen. A CPA who treats Puerto Rico like a domestic state filing will misapply source-of-income rules, triggering Puerto Rico Treasury audits or, worse, IRS challenges to your bona fide residency claim.

The IRS uses three tests under Section 937 to determine bona fide Puerto Rico residency: the presence test (183 days minimum in Puerto Rico), the tax home test, and the closer connection test. Your CPA's job is to build and maintain the contemporaneous documentation file that proves all three, including a detailed travel log, lease or ownership records, Puerto Rico driver's license date, bank account locations, and proof that your primary workplace is on the island. An IRS audit of Act 60 residency typically reaches back three years and requests this documentation in full, so CPAs who start organizing it retroactively are already behind. For a direct comparison of what territorial structures look like outside the US system, this breakdown of Chile's territorial tax rules illustrates how source-of-income definitions vary across jurisdictions.

Every Act 60 Individual Investor decree requires an annual report filed with Puerto Rico's Department of Economic Development and Commerce (DDEC) by June 30 of each year, along with proof of the $10,000 charitable donation to Puerto Rico-based nonprofits. Export Services decree holders (the former Act 20 side) must also document that services are provided to non-Puerto Rico customers and that the grantee entity pays at least one full-time employee on the island a market-rate salary. CPAs handling these filings need to track the decree's specific conditions, which vary by year of grant, since the 2019 consolidated Act 60 changed several thresholds from earlier Act 20 and Act 22 decrees.

The 0% Puerto Rico tax rate and the exemption from US federal tax on Puerto Rico-source income only apply to income that is correctly sourced to Puerto Rico under both federal and local rules. For service businesses, this means the work must be performed physically in Puerto Rico for clients outside the island. For investors, capital gains are only exempt if the assets were acquired after establishing bona fide residency and the gain accrued while resident. CPAs must allocate income across jurisdictions line by line, and any income incorrectly classified as Puerto Rico-source on the Form 482 while also excluded from the federal 1040 creates a gap the IRS targets directly in residency audits.

A qualified CPA or tax attorney in Puerto Rico handling a full Act 60 compliance package, including both the federal 1040 with international information returns and the Puerto Rico Form 482 plus DDEC annual report, typically charges between $5,000 and $15,000 per year depending on entity complexity and the number of foreign information returns required. CPAs who advertise Act 60 services on the mainland at $1,500 to $2,000 are almost always pricing only one of the two returns or are not familiar with the DDEC reporting obligation. The cost of a clean filing is small relative to the tax savings, but it is also small relative to the cost of an IRS residency challenge, which routinely produces assessments in the six-figure range.

The right CPA holds a Puerto Rico CPA license (issued by the Puerto Rico Board of Accountancy) or partners directly with a local licensee, has handled at least a dozen Act 60 decrees across both the Individual Investor and Export Services chapters, and can name the specific DDEC forms and filing deadlines without prompting. Ask directly whether they prepare Form 482, who signs it, and whether they have defended an IRS Section 937 audit. A firm that outsources the Puerto Rico return to a third party without disclosing it adds a coordination failure risk to your compliance chain. Many high-net-worth Act 60 residents use a two-firm model: a large mainland firm for federal returns and a San Juan-based firm for the local return, with a formal coordination agreement between them.