Chapter Five

Common Mistakes That Kill Decrees

We have watched people lose their Act 60 decrees. We have watched people face IRS audits. We have watched people spend more in penalties and back taxes than they ever saved through the program. In every single case, the mistake was avoidable.

Here are the ones we see most often. Learn them. Avoid them.

Mistake #1: The 183-Day Problem

People cut it close and something goes wrong. A family emergency. A business trip that ran long. A hurricane. An emergency or extended business trip costs them eleven Puerto Rico days, and a plan that was already too tight leaves them eleven days short of the 183-day requirement.

The fix is simple: don't plan to hit 183 days. Plan to hit 200. Build the buffer before life has a chance to eat it.

Mistake #2: Not Buying Property

Act 60 requires individual investors to purchase real property in Puerto Rico within two years of receiving their decree, for use as their principal residence. This is not optional, and it is not ambiguous. Your property must be your actual home — not a rental property, not a vacation condo you visit occasionally.

We have seen people receive their decree, delay buying because the market seemed uncertain, miss the two-year window, and lose their decree. Buy the property. It's an investment in the world's most beautiful tax compliance strategy.

Mistake #3: Forgetting the Charitable Donation

The annual $10,000 charitable donation to Puerto Rico-based nonprofits is a mandatory condition of maintaining your decree. $5,000 must go to organizations certified by the CECFL (typically focused on child poverty eradication). The remaining $5,000 goes to any certified Puerto Rico nonprofit.

This requirement is not a nice-to-have. Failing to make this donation puts your decree at risk. Calendar it as a recurring item. Make it in January. Get receipts. Keep them forever.

The good news: your required charitable donation can do real good in the community you're now part of. We've published a guide to vetted Puerto Rico nonprofits at doradobeachinsider.com — organizations doing genuine work that could use your support.

Mistake #4: Missing the Annual Report

Every Act 60 decree holder must file an annual report with the Puerto Rico Department of Economic Development and Commerce (DDEC) through the Incentives Portal at https://incentives.ddec.pr.gov. The commonly quoted $5,005 amount consists of the $5,000 government fee plus a $5 portal charge. The deadline follows the Puerto Rico income-tax filing schedule; November 15 may apply when filing on extension. Confirm your exact deadline and amount with your CPA and DDEC.

Miss it and you're not in compliance. Miss it repeatedly and you risk losing your decree. This is a calendar reminder, not a complicated task — but you have to actually do it.

Mistake #5: Keeping One Foot on the Mainland

This is the most common and the most dangerous mistake. People get their decree, move to Puerto Rico, and then slowly drift back — a few more trips home, keeping the old apartment "just in case," kids going back to mainland schools, gradually spending more time in the U.S. than in Puerto Rico.

The IRS sees this. It shows up in credit card records, phone location data, flight records, and the testimony of people who know you. If your life is fundamentally still on the mainland and Puerto Rico is a very expensive tax address, you are not Act 60 compliant.

Mistake #6: Bad Professional Advice

Act 60 has attracted a significant number of advisors who don't know what they're doing — on both ends of the spectrum. Some tell you it's easy and bulletproof and you don't need to worry. Others are so conservative they'll talk you out of perfectly legitimate strategies.

Get experienced, specialized professionals. Your mainland CPA who is "pretty sure they can handle it" is not the right person for this. You need an attorney who has filed dozens of Act 60 applications and a CPA who has navigated Puerto Rico's tax system professionally, not occasionally.

Mistake #7: Pre-Residency Gains

This one costs people dearly. Gains that were accrued before you became a Puerto Rico resident do not qualify for the Act 60 exemption, even if you realize them after the move. The IRS scrutinizes this heavily, particularly for people who moved shortly before selling a business or a large stock position.

Timing your move relative to major liquidity events requires careful, specific professional guidance. There is no one-size-fits-all answer, and the wrong timing can negate years of benefit.

This chapter discusses common compliance issues for educational purposes. Every situation is different. Please consult qualified legal and tax professionals before making any decisions related to Act 60 compliance.