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What does this mean? It means that once the person becomes a resident individual investor of Puerto Rico unde Puerto Rico Incentives Code 60 — and until 1/1/2036 — any dividend or interest income is exempt from tax in Puerto Rico.

Purpose Of Act 73 Puerto Rico The purpose of Act 73 in Puerto Rico is to provide an entrepreneurial environment and adequate economic opportunities to continue developing a local industry that recognizes entrepreneurship as the cornerstone for the present and future economic development of Puerto Rico.

Once you live in Puerto Rico, your passive income is now “Puerto Rico source income,” and Section 933 of the Internal Revenue Code says you don't have to pay federal taxes on Puerto Rico source income. Act 60 says you don't have to pay Puerto Rico taxes on passive income.

Specifically, a U.S. citizen who becomes a bona fide Puerto Rico resident and moves his or her business to Puerto Rico (thus, generating Puerto Rico sourced income) may benefit from a 4% corporate tax/fixed income tax rate, a 100% exemption on property taxes, and a 100% exemption on dividends from export services.

Incentives: 100% exemption from Puerto Rico income taxes on interest and dividends. 100% exemption from Puerto Rico income taxes on all short-term and long-term capital gains generated after the individual becomes a bona-fide resident of Puerto Rico (“Puerto Rico Gain”).

Chapter 2 of Act 60 for Individual Investors provides 100% tax exemption from Puerto Rico income taxes on all interest and dividend income and on certain capital gains realized and accrued after such individual becomes a bona fide resident of Puerto Rico.

The purpose of Puerto Rico Incentives Code 60 is to promote investment in Puerto Rico by providing investment residents with tax breaks. As provided by Puerto Rico Incentives Code 60: This Code is approved with the conviction that it shall improve Puerto Rico's economic competitiveness.

Therefore, if an individual relocates to Puerto Rico, the move does not result in an expatriation tax. Further, U.S. citizens and resident aliens living in Puerto Rico are generally subject to U.S. tax on worldwide income.