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Act 22 Application Procedure-Compliance Tips

Puerto Rico’s Act No. 22 of 2012 is better known as the “Individual Investors Act” (the “Act”). This Act already has profound implications and also provides tax exemptions to eligible individuals residing in Puerto Rico. Now, in order to request such benefits, an individual needs to become a resident of Puerto Rico, apply for a tax exemption decree, and follows consider the following Act 22 Compliance Tips.

Points to consider before, during, and after your application process and approval.

1- Individuals should not have been a Puerto Rico (PR) resident between 2006 and 2012

2- Then they must submit and obtain the tax exemption grant

3- Become a resident within a year of approval. In order to be considered a resident you should comply with the following 3 tests:

Presence test, you need to fulfill 1 of the following conditions (if you fulfill one of the following you are in compliance with it)

  • Being physically present in PR for 183 full days
  • Being physically present in PR for an average of 183 full days for a 3 year period
  • Not being present in the United States for more than 90 days during a tax year
  • Income from US Source does not exceed $3,000
  • No significance connection with the United State, this means not having a permanent home in the United States, voting registration in the United States, or having a Spouse or Child under 18, whose principal home is in the United States

Tax home test – taxpayer’s main place of doing business should be Puerto Rico. If there are additional places, none of those abroad should be the main source and place of doing business.

Closer connection test – avoid having a close connection to the United States considering the following

  • taxpayer’s permanent home,
  • taxpayer’s family location,
  • taxpayer’s personal belongings location (i.e. jewelry, cars, furniture, etc.),
  • taxpayer’s main banking activities,
  • taxpayer’s driver’s license jurisdiction, and taxpayer’s voting jurisdiction.

4- Open a Bank Account in PR

5- Donate $5,000 annually to a PR based not-for-profit organization



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