Investing in Puerto Rico
Tourism Development Tax Incentives (Act 60) in Puerto Rico
Discover how Act 60 can transform your real estate investments in Puerto Rico with powerful tourism development tax incentives. Whether you’re a small investor or a large firm, these incentives—especially when combined with Opportunity Zones—can unlock major financial advantages and accelerate your project’s success.
What Are Tourism Development Tax Incentives (Act 60)?
Act 60, also known as the Puerto Rico Incentives Code, consolidates and enhances a range of tax benefits for investors and developers in the tourism sector. Its goal: to stimulate economic growth, create jobs, and attract world-class hospitality projects to the island.
Key Benefit:
- 40% Tax Credit for eligible tourism projects with 7 units or more (such as hotels, resorts, short-term rental complexes, and hospitality-focused developments).
Benefits of Act 60 for Tourism Projects
Substantial Tax Credits:
Up to 40% of eligible tourism project costs can be claimed as tax credits, dramatically reducing your net investment.
Flexible Usage:
Credits can be used to offset Puerto Rico income tax liability or sold/transferred to other taxpayers.
Stackable with Opportunity Zones:
If your project is located within a federally designated Opportunity Zone, you can combine Act 60 credits with capital gains tax deferral and exclusion benefits.
Applies to New Construction & Major Renovations:
Both ground-up developments and significant rehabs may qualify.
Supports Both Small and Large Investors:
Whether you own a boutique guesthouse or a large-scale resort, Act 60 is designed to encourage a wide range of tourism investments.
What Are Opportunity Zones?
Opportunity Zones are special geographic areas designated by the U.S. Treasury to spur economic development and job creation. Investments made in these zones may qualify for federal capital gains tax deferral and, if held long enough, partial or total exclusion from capital gains tax.
Why This Matters:
Many of Puerto Rico’s tourism hotspots are within Opportunity Zones, allowing you to multiply your tax benefits by leveraging both federal and Act 60 incentives.
Qualifications: Who and What Projects Are Eligible?
To qualify for Act 60 tourism tax incentives, projects must generally meet the following criteria:
Location:
The property must be in Puerto Rico, ideally within a designated Opportunity Zone for maximum benefit.
Project Type:
Eligible uses include hotels, guesthouses, condo-hotels, hostels, timeshares, short-term rental complexes, and other tourism-related developments.
Minimum Size:
At least 7 units or rooms are required to qualify for the 40% tax credit.
Investment Threshold:
The project must meet minimum capital investment standards as set by the Puerto Rico Tourism Company.
Application & Approval:
Investors must submit a detailed proposal for review and receive a tax grant from the Puerto Rico Tourism Company before beginning construction or renovation.
Compliance:
Projects must adhere to local building codes, tourism regulations, and ongoing operational requirements.
How to Get Started
Identify Your Property or Project:
Target properties within Opportunity Zones for maximum benefit.
Consult with Local Experts:
Work with a real estate disposition specialist (like Luxvinea Capital), tax advisor, and Puerto Rico legal counsel experienced in Act 60 and Opportunity Zones.
Prepare Your Application:
Gather documentation on your project scope, budget, design, and anticipated economic impact.
Submit to the Puerto Rico Tourism Company:
Apply for the Act 60 tax grant and await approval.
Develop & Operate:
Once approved, proceed with construction/renovation and maintain compliance to retain your tax benefits.
Case Studies: Leveraging Tax Incentives in Puerto Rico
Small Investor Example
A local entrepreneur acquires a historic building in Old San Juan within an Opportunity Zone and converts it into an 8-unit boutique guesthouse. By leveraging Act 60, the investor receives a 40% tax credit on qualified rehab costs and defers capital gains tax on reinvested profits, resulting in a dramatically improved return on investment.
Large Firm Example
A U.S.-based hospitality group develops a 150-room beachfront resort in an Opportunity Zone near Rincon. By stacking Act 60 tourism credits with Opportunity Zone capital gains benefits, the firm reduces its federal and Puerto Rico tax exposure, accelerates project payback, and attracts additional equity partners due to the favorable tax structure.
Conclusion
Tourism Development Tax Incentives under Act 60—especially when combined with Opportunity Zones—offer a compelling reason to invest in Puerto Rico’s hospitality sector. Small and large investors alike can benefit from substantial tax credits, capital gains tax relief, and the chance to participate in the island’s economic revitalization.
Ready to explore your options?
Contact Luxvinea Capital for a consultation and discover how you can maximize your returns with Act 60 and Opportunity Zone investments in Puerto Rico.