The Puerto Rico Legislature recently approved House Bill 505 (“HB 505”), which—if enacted—would introduce significant changes for future Individual Resident Investors by amending the Puerto Rico Incentives Code, Act 60-2019 (“Act 60”). This legislation marks a new stage in the evolution of Puerto Rico’s incentive program for relocating investors, originally created under Act 22-2012 (“Act 22”) and later consolidated into Act 60.

For investors currently on the fence about moving to the island, HB 505 might be an important bill to keep track of, as it proposes a limited window to secure a 0% tax rate on certain investment income and capital gains. If HB 505 is approved, this grandfathered regime will only be available to those who submit their applications by December 31, 2026.

HB 505 was approved by the Puerto Rico legislature on February 17, 2026. The final version of the bill was signed by the presidents of the House and Senate on February 25 and 26, 2026, respectively, and will soon be subject to the evaluation of the Governor of Puerto Rico.

While grandfathered investors would remain unaffected, the revised Act 60 would implement less favorable (but still preferential) tax rates for applicants who submit their decree applications after December 31, 2026. Here’s a summary of the proposed incentive’s structure:

Additional Requirements for New Applicants After 2026

In addition to the new tax rates, HB 505 introduces modified eligibility and compliance requirements for future applicants, including:

1. Prior Residency: New applicants after 2026 must demonstrate they were not a Puerto Rico resident for at least 6 years prior to moving to Puerto Rico.
2. Additional requirements regarding real property ownership: While all Individual Resident Investors must purchase a principal residence within two years of the decree, HB 505 adds a more specific requirement for individuals who apply on or after January 1, 2027. For this group, evidence of property ownership must prove that the title to the principal residence is either registered or pending registration in the Puerto Rico Property Registry. Per HB 505, this registration must be in the name of:
   • The Individual Resident Investor;
   • The Individual Resident Investor and their spouse jointly; or
   • A trust as described in Section 2022.07.

Program Extension and Transition Options

Finally, HR 505 offers options for Individual Resident Investors who would prefer the new incentives. This might be worth considering for many investors, given that HB 505 would extend the availability of the Individual Resident Investor program through 2055 (instead of 2035 under the current statute). Pending applications filed on or before December 31, 2026, that have not yet been granted could, at the applicant’s election, be processed under the post-2027 provisions. Similarly, certain existing decree holders (including prior Act 22 decrees and Act 60 decrees applied for by December 31, 2026) could request a modification to adopt the post-2027 terms.

Key take aways:

Individuals considering relocation to Puerto Rico should closely monitor the progress of HB 505. Below are the key changes this bill would introduce if enacted into law:

• Individuals must submit their Act 60 Individual Resident Investor application by December 31, 2026 to retain the current 0% tax rate on dividends, interest, and post-residency capital gains.
• Applications filed on or after January 1, 2027 would face a 4% tax rate on dividends, interest, and capital gains—still preferential, but less favorable than the current regime.
• Starting in 2027, applicants must meet tighter residency and property ownership requirements, while the program itself would be extended through 2055.

At RSM Puerto Rico, we can assist you in evaluating how these proposed changes may affect your tax position or future plans. For additional information or assistance, consider reaching out to RSM Puerto Rico’s Tax Advisory team at (787) 751-6164 | tax@rsm.pr.

This article was written by our Tax Advisory Associate Edsel Mejías, Esq.