Puerto Rico Act 60: The Only Way for Americans to Pay 0% Capital Gains
Tax Tips / Geo-Arbitrage
Puerto Rico Act 60: The Only Way for Americans to Pay 0% Capital Gains
💡 Executive Summary
- Problem: US Citizens are taxed on worldwide income, regardless of where they live. Moving to Dubai or Singapore doesn’t stop the IRS (unless you renounce citizenship).
- Solution: Become a Bona Fide Resident of Puerto Rico under Act 60 (formerly Act 20/22).
- Result: Pay 0% Capital Gains Tax on assets acquired/appreciated after the move, and 4% Corporate Tax on exported services.
⚠️ YOU MUST ACTUALLY MOVE
This is not a “PO Box” strategy. The IRS tracks your location (cell phone, credit cards). You must spend at least 183 days/year in Puerto Rico and have your “Center of Vital Interests” (family, doctor, gym) on the island.
This is not a “PO Box” strategy. The IRS tracks your location (cell phone, credit cards). You must spend at least 183 days/year in Puerto Rico and have your “Center of Vital Interests” (family, doctor, gym) on the island.
For Crypto Whales, Hedge Fund Managers, and Digital Entrepreneurs (Tier L3+), Puerto Rico is the ultimate “Escape Hatch.” Thanks to IRC § 933, income sourced within Puerto Rico is exempt from US Federal Tax. It is the only place on earth where a US passport holder can legally ignore the IRS for capital gains.
🧐 Core Mechanic: The “Split” Basis
Gains accrued before you move are still taxable in the US (Built-in Gain). Only the gains accrued after you become a resident are 0%.
*Tip: Use the 10-year rule to eventually wipe out pre-move gains (wait 10 years to sell).
Gains accrued before you move are still taxable in the US (Built-in Gain). Only the gains accrued after you become a resident are 0%.
*Tip: Use the 10-year rule to eventually wipe out pre-move gains (wait 10 years to sell).
Performance Simulation
Exit Event ($10M Capital Gain)
California Resident
~37% Combined Tax
$6.3M Net
Puerto Rico Resident (Act 60)
0% Tax (After Move)
$10.0M Net
Tax Comparison: US vs. PR
| Tax Type | Mainland US (Fed + State) | Puerto Rico (Act 60) |
|---|---|---|
| Capital Gains | 23.8% + State (up to 13.3%) | 0% |
| Corporate Tax | 21% + State | 4% (Export Services) |
| Dividends | 23.8% + State | 0% (From PR Corp) |
“It’s not just about saving tax; it’s about freedom. Puerto Rico offers the benefits of an offshore tax haven with the protection of the US legal system and currency.”
🔗 Related BMT Playbooks (Internal)
🛡️ The Alternative: QSBS (If you can’t move, use this for 0% tax) ⚖️ The Combo: Opportunity Zones (PR is mostly an OZ) ✅ The Setup: Establishing a Family Office in PR🏛️ Institutional Resources (External)
📜 Legal Text: IRC § 933 (Income from sources within Puerto Rico) 🏛️ IRS Guide: Publication 570 (Tax Guide for Individuals in US Territories) 🇵🇷 PR Government: Dept of Economic Development (DDEC)
BMT designs for tax reality, not theory.