Act 22 – Individual Investors

The Act 22 - Individual Investors Act seeks to attract new residents to Puerto Rico

Act 22 is an economic development program. While almost all other economic development programs focus on incentives for businesses, this program is designed for individuals that relocate to the Commonwealth of Puerto Rico, a U.S. Territory. Act 22 provides a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of Puerto Rico. Incoming Act 22 participants has resulted in new local investments in real estate, services and other consumption products, and in capital injections to the Puerto Rico banking sector, all of which accelerate the economy of Puerto Rico. Act 22 complements Act 20 incentives, which are for active income from eligible services, and can be used in tandem by Act 20 participants. Very often, Act 22 is used stand-alone by individual investors that do not participate in Act 20 or other economic development programs.

Below is the description of the Act 22 program as provided by the Puerto Rico Department of Economic Development and Commerce (DDEC).

Act 22 - ​Individual Investors Act Overview​

  • ​APPLICABILITY
  • ​RESIDENCY
  • ​PASSIVE INCOME
  • ​EXEMPTION PERIOD

Special Tax Rule under the US Code for Puerto Rico Bona Fide Residents

Pursuant to Section 933 of the Internal Revenue Code of the United States of 1986 (the “US Code”), income derived from sources within Puerto Rico by individuals who are a bona fide residents of Puerto Rico during the entire taxable year is not included in gross income and is exempt from taxation under the US Code. (the “Section 933 Exclusion”).

The term bona fide resident of Puerto Rico means a person who:

   (1) is present for at least 183 days during the taxable year in Puerto Rico, 

   (2) does not have a tax home outside of Puerto Rico during the taxable year; and 

   (3) does not have a closer connection to the United States or a foreign country than to Puerto Rico.

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