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The 4% Strategy: Transforming Your Consulting Tax Burden via Puerto Rico La Estrategia del 4%: Transformando Su Carga Fiscal de Consultoría vía Puerto Rico
Not sure if you qualify for Export Services? ¿No está seguro si califica para Servicios de Exportación?
Our free eligibility quiz analyzes your situation and tells you which Act 60 chapter is best for you. Nuestro cuestionario de elegibilidad gratuito analiza su situación y le dice qué capítulo de Ley 60 es mejor para usted.
Take the 5-minute quiz → Tome el cuestionario de 5 minutos →What if you could slash your effective tax rate from nearly 50% to just 4% without renouncing your U.S. citizenship?
For high-earning American consultants and business advisors, Act 60 (Export Services) makes this a reality. By relocating your professional operations to Puerto Rico through PuertoRicoLLC.com, you can legally exempt your income from federal taxation under IRS Section 933, paying only a modest local corporate rate.
The Act 60 Foundation
The strategy is built on Chapter 3 (Export Services), a legislative framework designed to turn Puerto Rico into a global hub for professional services:
4% Corporate Tax
Fixed rate on net income from services for clients outside PR
0% Dividend Tax
100% exemption on distributions to bona fide residents
0% Federal Tax
IRC Section 933 excludes PR-sourced income from federal tax
Do You Qualify?
The "Export" requirement is the most critical pillar. To qualify, your services must be performed on the island for customers outside the island.
Eligible Professional Services:
Consulting
Managerial, marketing, economic, environmental, and scientific
Tech & Creative
Software development, IT, digital marketing, and design
Professional Services
Investment management, legal, and shared services
Establishing Bona Fide Residency
The IRS applies a "cliff" effect:
If you fail residency, you lose 100% of the benefits. To be a Bona Fide Resident, you must satisfy three essential tests:
The Presence Test
Spend at least 183 days on the island annually
The Tax Home Test
Your primary place of business must be in Puerto Rico
The Closer Connection Test
Your personal, social, and civic ties must be closer to PR than mainland U.S.
Key Requirement:
Within two years of receiving your decree, you must purchase residential property in Puerto Rico for use as your primary home.
Business Infrastructure & Substance
Successfully transitioning to a 4% rate requires more than a paper filing; it requires genuine economic substance. At PuertoRicoLLC.com, we facilitate the creation of a robust corporate presence:
Physical Office Presence
You must maintain a bona fide office in Puerto Rico where professional activities are conducted.
Reasonable Salary
Owners must pay themselves a "reasonable salary" (market rate for your role). This salary is taxed at ordinary PR rates, while all remaining profit qualifies for the 4% corporate rate.
Annual Philanthropy & Compliance
A mandatory annual process including a $10,000 donation to approved local nonprofits.
Apples-to-Apples Comparison
NYC/California vs. Puerto Rico
Scenario: Consultant earning $500,000 net profit with $120,000 reasonable salary
| Tax Category | NYC/California | Puerto Rico |
|---|---|---|
| Federal Income Tax | $154,000 | $0 |
| State/Local Income Tax | $65,000 | $31,500 |
| FICA (Social Security) | $11,439 | $11,439 |
| FICA (Medicare) | $7,250 | $7,250 |
| Corporate Income Tax | $0 | $15,200 |
| Compliance & Charity | $0 | $20,000 |
| Total Costs | $237,689 | $85,389 |
| Take-Home Pay | $262,311 | $414,611 |
Year 1 Net Savings:
$152,300
Effective tax rate drops from ~48% to ~17%
The Application Roadmap
Your Tax Exemption Decree is a 15-year binding contract that protects your tax rate even if future laws change.
Entity Formation
Organize your Puerto Rico LLC through PuertoRicoLLC.com
Decree Application
Submit Form 480.20 to Office of Incentives ($1,000 gov fee)
On-Island Relocation
Establish your physical tax home and meet residency day counts
Ongoing Compliance
File annual reports ($500 fee) and maintain meticulous travel logs
The PuertoRicoLLC.com Advantage
Navigating the precision required for IRS residency and Act 60 compliance is our core focus at PuertoRicoLLC.com. We ensure that your move is not just a strategy on paper, but a sustainable, legally protected reality that scales with your success.
Schedule Your Strategic ConsultationAverage savings: $150,000+ annually • 15-year decree protection