Puerto Rico Governor Jenniffer González-Colón has signed into law Act 38-2026 (Act 38), which amends Act 60-2019 (Puerto Rico Incentives Code) to modify tax benefits available to Individual Resident Investors (IRIs). Notably, Act 38 (i) extends the IRI program until December 31, 2055 and (ii) imposes a four-percent income tax on dividends, interest, and certain capital gains for investors who submit decree applications after December 31, 2026.
Key changes
Puerto Rico tax rate based on application date
Previously, under the Puerto Rico Incentives Code, IRIs were exempt from Puerto Rico income tax on interest, dividends, and certain post-residency capital gains. Act 38 modifies this rule by imposing a tax rate of four percent (unless a more favorable tax rate applies under a different law) for individuals applying for decrees after December 31, 2026. The current and new rules can be summarized as follows:
Six-year look-back period and residency requirement
For decree applications submitted after December 31, 2026, an individual must not have been a resident of Puerto Rico during the six-year period immediately preceding their relocation and must establish Puerto Rico residency by December 31, 2055.
Decree modification option
Act 38 allows IRIs who obtained or requested a decree before December 31, 2026 to modify their existing decrees to adopt the new tax regime. Since decrees are usually granted for 15 years (with a potential extension of 15 additional years), this may be beneficial to investors who recently obtained their tax decrees and whose tax exemption on dividends, interest, and post-residency capital gains would otherwise expire on December 31, 2035.
Fiscal Oversight and Management Board endorsement
Although Act 38 was signed by the governor, it is pending final endorsement from the Fiscal Oversight and Management Board for Puerto Rico.
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