Tax planning

Delaware LLC vs Puerto Rico Act 60: when to consider PR for tax planning

Puerto Rico's Act 60 offers significant tax advantages for some founders. How it compares to a Delaware LLC and when each makes sense.

By Zawwad, Tax & Compliance Lead (pending hire, reviewed by founder), DelewarellcPublished May 15, 2026 · Last updated May 15, 2026

Reviewed by Zawwad until this role hire is complete.

What Act 60 offers

Reduced PR corporate tax rates (4% on export-services income, 0-4% on other categories). Reduced individual tax on capital gains and dividends earned during PR residency. Act 60 requires bona fide PR residency: physical presence test, tax-home test, closer-connections test.

PR is a US territory; income earned by PR residents from PR-source business is generally exempt from US federal tax under IRC § 933, with specific carve-outs and conditions.

When Act 60 makes sense

US citizens or residents willing to physically relocate to Puerto Rico and meet the residency tests. Founders generating significant US-source service or capital-gains income. Tech founders, consultants, content creators with high-margin business models.

Act 60 requires real residency; the IRS audits PR residency claims aggressively. Founders treating PR as a paper-residence trick face substantial tax and penalty exposure.

When Act 60 does not apply

Non-residents abroad cannot use Act 60 because they cannot meet the PR residency tests. The Delaware LLC structure remains the standard non-resident path.

Founders from countries with strong home-country tax (e.g., higher-tax European jurisdictions) may find that Act 60 plus relocation is more attractive than home-country residency. The comparison is a personal-life decision as much as a tax decision.

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