Puerto Rico Act 60: 0% Capital Gains Without Renouncing Citizenship
Tax Tips / Geo-Arbitrage
Puerto Rico Act 60: 0% Capital Gains Without Renouncing Citizenship
💡 Executive Summary
- Problem: Living in NYC or CA means giving up ~50% of your income and ~37% of your capital gains to taxes. But you don’t want to renounce your US Citizenship (Exit Tax).
- Solution: Move to Puerto Rico and apply for Act 60 (formerly Act 20/22). PR is a US Commonwealth with its own tax system.
- Result: 1) 4% Flat Tax on Export Services income (Consulting/Trading). 2) 0% Capital Gains Tax on assets acquired after moving. 3) You keep your US Passport.
⚠️ THE “BUILT-IN GAINS” CATCH
Act 60 does not erase past gains. If you bought Bitcoin at $100 and move to PR when it is $50,000, then sell at $100,000:
• The $49,900 gain (Pre-Move) is taxed by the US IRS.
• The $50,000 gain (Post-Move) is Tax-Free.
This creates a powerful incentive to move before your next big liquidity event.
Act 60 does not erase past gains. If you bought Bitcoin at $100 and move to PR when it is $50,000, then sell at $100,000:
• The $49,900 gain (Pre-Move) is taxed by the US IRS.
• The $50,000 gain (Post-Move) is Tax-Free.
This creates a powerful incentive to move before your next big liquidity event.
Puerto Rico offers the only legal way for a US Citizen to escape the IRS’s worldwide taxation without expatriating. By spending 183 days a year on the island, you enter a “Parallel Tax Universe” designed to attract High-Net-Worth investors and service businesses.
🧐 Core Mechanic: Section 933 Exclusion
IRC Section 933 states that income derived from “sources within Puerto Rico” is exempt from US Federal Tax. Act 60 then sets the PR tax rate on that income to near zero. It is a perfectly legal double-loophole sanctioned by Congress.
IRC Section 933 states that income derived from “sources within Puerto Rico” is exempt from US Federal Tax. Act 60 then sets the PR tax rate on that income to near zero. It is a perfectly legal double-loophole sanctioned by Congress.
Performance Simulation: The “Island Alpha”
Tax Liability on $5M Trading Profit
New York Resident
~$2.5M Tax (Fed + State + NIIT)
50% Gone
Puerto Rico Resident (Act 60)
$0 Tax (If Capital Gains)*
100% Kept
Requirements: To Be a “Bona Fide” Resident
| Test | Requirement | Pitfall |
|---|---|---|
| Presence Test | 183 Days / Year | Strict counting (don’t fake it) |
| Tax Home Test | Center of Life in PR | Family/School must move too |
| Closer Connection | No stronger ties to US | Don’t keep empty NY mansion |
| Donation | $10k / Year to Charity | Mandatory for Decree |
“Act 60 is not just a tax break; it is a lifestyle trade. You trade winter for summer, and the IRS for the Hacienda, to compound your wealth twice as fast.”
🔗 Related BMT Playbooks (Internal)
🛡️ The Hard Exit: Renunciation (If PR is not enough or you hate the island) ⚖️ The Combo: PR is almost entirely a QOZ (Double stacking benefits) ✅ The Vehicle: Setting up International Insurers in PR (Act 399)🏛️ Institutional Resources (External)
📜 Legal Text: IRC § 933 (Income from Puerto Rico) 🏛️ PR Gov: Department of Economic Development & Commerce (DDEC) 📘 IRS Guide: Publication 570 (Tax Guide for Individuals in US Possessions)
BMT designs for tax reality, not theory.