Act 38-2026, signed March 10, amended Puerto Rico's Individual Resident Investor program and split it in two. Applications filed on or before December 31, 2026 keep the zero percent regime through 2035. Applications filed after enter a 4 percent regime that runs to 2055. Every decree in either regime carries the same statutory obligation, the purchase of Puerto Rico real property as a principal residence within two years. Realtors, notaries, and applicants are all inside this law now.
KEY IMPLICATIONS
Two Regimes, One Deadline
The amendment rewrote Sections 2022.01 and 2022.02 of the Incentives Code into parallel tracks keyed to the filing date of the decree application. File on or before December 31, 2026 and the existing architecture applies. Interest and dividends from all sources are fully exempt from Puerto Rico income tax through January 1, 2036, capital gains on appreciation after the move are fully exempt if recognized before that date, and appreciation from before the move pays 5 percent if recognized more than ten years after residency begins. File on or after January 1, 2027 and the new architecture applies instead. A fixed preferential 4 percent reaches interest, dividends, and post-move gains recognized before January 1, 2056, pre-move appreciation keeps the 5 percent treatment on the ten-year track, and any more favorable rate available under other law controls over the 4 percent.
Section 6020.03(d) adds the bridges. An application already filed by the deadline can be processed, at the applicant's election, under the new provisions, and any holder of an Act 22 decree or a pre-2027 Act 60 decree can request a modification into the new terms, which is the path to trading a 2035 horizon for a 2055 one. Article 6 of the law states that all rights under existing decrees continue to be honored. The Legislature grounded the change in the DDEC-commissioned study finding that the investor and export programs had generated more than 75,000 direct and indirect jobs and $650 million in revenue by 2022, and that a move from zero to 4 percent was compatible with the program's viability. The firm's earlier analysis of the extension covers the program mechanics in detail. As of this writing, DDEC has not published implementing guidance on the election and modification procedures, so the statutory text governs the planning.
One clarification from the firm's chapter in the Chambers International Tax 2026 Global Practice Guide deserves emphasis. The application submission date controls cohort membership. An applicant who files a complete application by December 31, 2026 keeps zero-rate treatment even if the decree issues and residency begins in 2027 or later. The benefits still require actual bona fide residency, and a decree without genuine relocation describes advantages its holder cannot claim.
The Purchase Mandate
Section 6020.10(c), as amended, states the real estate obligation with unusual specificity. The decree holder must acquire, by purchase, within two years of obtaining the decree, title to real property in Puerto Rico that constitutes their principal residence. The acquisition must be as sole owner or jointly with a spouse. The seller must be a person or company totally unrelated to the decree holder. And the annual report to the DDEC must certify exclusive and complete dominion over the property, as principal residence, for the entire life of the decree.
The purchase obligation itself predates the amendment. What Act 38-2026 changed is the ownership limitation, title held by the decree holder individually, jointly with a spouse, or through an eligible trust, and the registry evidence rule for the post-2026 cohort.
Each element does work. Purchase means purchase, so property received by inheritance or gift does not satisfy the statute. The unrelated-seller requirement forecloses the familiar shortcut of transferring a property from the holder's own entity into personal title. Principal residence excludes the investment condo held for rental. And the continuous-dominion certification converts the closing from a one-time event into a standing compliance representation renewed every year.
The annual certification is not a formality. In 2025, the DDEC's Office of Incentives audited 1,798 decrees and issued 305 deficiency notices carrying fines up to $10,000, with four decrees revoked and more than 887 surrendered voluntarily. For 2026 the agency announced sample-based audits across every Act 60 industry, automated deficiency notices for late annual reports, and fines beginning at $1,000 with escalation to revocation, and every new individual investor application now requires a criminal background certification from the applicant's prior country of residence.
Title, the Registry, and the Trust Option
For applications filed from January 1, 2027 onward, the statute goes further into conveyancing practice than any prior version of the program. The annual evidence must show that full dominion title to the principal residence is inscribed, or pending inscription, in the Registro de la Propiedad, in the name of the decree holder, jointly with the spouse, or in the name of a trust described in Section 2022.07.
The drafting is realistic about Puerto Rico registry timelines, which is why pending inscription qualifies. It is also demanding about everything a closing file must now contain. A registral title study, a properly executed escritura pública, a documented presentation at the Registry, and a clean chain into the decree holder's name are no longer only good practice. They are conditions of a tax decree. The trust option opens planning room for applicants coordinating the residence with succession structures, and it makes the choice of titling vehicle a decision to take before the closing rather than after it.
Who the New Eligibility Actually Reaches
The popular shorthand says the program opened to Puerto Ricans. The text is more precise. The amended definition in Section 1020.02(a)(4) keeps the historical bar, no eligibility for anyone who was a resident of Puerto Rico between January 17, 2006 and January 17, 2012, and adds that applications filed after December 31, 2026 must demonstrate a minimum of six years of non-residency before the move. The result is a defined diaspora. A person born and raised stateside qualifies. A person who emigrated before January 2006 and has stayed away six years qualifies. A person who left the island in 2015 does not, because the 2006 to 2012 window catches them. Advising a returning family on eligibility now begins with a residency timeline, and the difference between a viable application and a wasted filing fee can turn on a school year two decades ago.
What This Means
For realtors, the statute manufactures buyers on deadlines. Every decree granted starts a twenty-four month purchase clock, the December 31 filing window points toward a rush of applications this quarter, and the resulting purchase demand runs through 2028. The professional discipline is to calendar the client's clock, screen every prospective seller for relatedness to the buyer, and treat the escritura and registry status as deliverables of the engagement, because the client's tax decree depends on them.
For applicants, the next four months are a decision point. Filing by December 31 preserves the zero percent regime through 2035 and keeps the modification path to 2055 open. Filing after enters the 4 percent regime directly and adds the six-year test. Which side of the line serves a given family depends on their asset mix, their horizon, and their residency history, and it deserves individualized analysis before the calendar makes the choice for them. Bona fide residency remains its own obligation, and owning the property is one element of it rather than the whole.
For notaries and title practitioners, decree compliance now runs through the closing file. Registry-grade evidence of full dominion, titling in the correct name or qualifying trust, and documentation fit for an annual DDEC report belong in the transaction checklist from day one.
Maceira Zayas advises applicants, decree holders, and the professionals who close their transactions through its Tax Law practice, maintains a dedicated resource on the Individual Resident Investor program, and authored the Puerto Rico chapter of the Chambers International Tax 2026 Global Practice Guide, which covers Act 38-2026 and the enforcement developments discussed here.
Simón E. Carlo-Valentín, Esq., CPA, MBA Co-author, Puerto Rico Chapter, Chambers International Tax 2026 Maceira Zayas · San Juan, Puerto Rico · Washington, D.C.
This article is for informational purposes only and does not constitute legal or tax advice. Receipt of this publication does not create an attorney-client relationship.
