Plain English
Bona fide residence in Puerto Rico is the prerequisite for Act 60 individual tax benefits — including 0% Puerto Rico tax on certain capital gains accrued post-relocation. The test combines presence-day counts, tax-home, and closer-connection elements. Failing any one of them invalidates the Act 60 benefit.
How it actually works
The three IRS tests under Section 937: (1) Presence — generally at least 183 days in PR during the tax year. (2) Tax home — your principal place of business or employment must be in PR. (3) Closer connection — facts and circumstances must show stronger ties to PR than to the mainland US (family, social, banking, voting, driver’s license, etc.). All three must be satisfied.
What it means for you
For HNW principals pursuing Act 60, this is the foundational test. CPAs experienced with PR relocation typically build a substantiation file from day one — flight logs, utility bills, bank statements, club memberships, employment records. The IRS audits Act 60 returns at higher rates than average; the day you arrive in PR is the day your documentation discipline begins, not the day a notice arrives.
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Educational content only. Not investment, tax, or legal advice.