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Puerto Rico’s Act 60: Is It the Right Tax Strategy for Your Business?

Tax strategies are a critical part of financial planning for entrepreneurs and high-income earners, and Puerto Rico’s Act 60 might just be the opportunity you’ve been searching for. This set of tax incentives offers reduced tax rates for those willing to relocate their business and life to Puerto Rico. But before you pack your bags, it’s essential to understand the ins and outs of this program to determine if it’s the right fit for your goals.

In this blog, we’ll break down Act 60 into simple, digestible concepts. You’ll learn about its benefits, qualifications, and potential challenges, plus how Insogna CPA can help you navigate this opportunity confidently.

What Is Puerto Rico’s Act 60?

Let’s start with the basics: Act 60 is part of Puerto Rico’s Incentives Code, created to attract individuals and businesses to the island. It’s particularly appealing for U.S. citizens because Puerto Rico’s unique status as a U.S. territory allows residents to avoid federal income taxes on Puerto Rico-sourced income.

The program offers:

✅ 4% Tax on Business Income: For eligible export services and businesses.
✅ 0% Tax on Capital Gains: An incredible incentive for investors, including stock traders and crypto enthusiasts.
✅ 0% Tax on Dividends: Certain Puerto Rican-sourced dividends are tax-free for residents.

These tax breaks have made Puerto Rico a magnet for consultants, investors, and entrepreneurs looking to minimize tax burdens while enjoying a tropical lifestyle.

What Are the Benefits of Act 60?

Act 60’s benefits are hard to ignore if you’re focused on maximizing tax savings and growing your wealth. Let’s dive into the highlights:

1. Lower Tax Rates

For eligible businesses, the corporate tax rate drops to just 4%. Compare that to the U.S. federal corporate tax rate of 21%—not to mention state taxes—and the savings add up quickly.

2. No Federal Capital Gains Taxes

Capital gains taxes often eat into investment profits, but under Act 60, Puerto Rico-sourced gains are entirely tax-free. This is particularly appealing for cryptocurrency traders, stock market investors, and real estate professionals.

3. No Tax on Dividends

If you own a Puerto Rican business and distribute dividends to yourself, those distributions are free from local taxes.

4. Improved Cash Flow

Reduced tax burdens mean more cash to reinvest in your business or build personal wealth.

Who Qualifies for Act 60?

Act 60 isn’t a one-size-fits-all solution. To benefit, you’ll need to meet specific criteria:

📌 Establish Residency
To qualify, you must become a bona fide resident of Puerto Rico. This means spending at least 183 days per year on the island and making it your primary home.
📌 Puerto Rico-Sourced Income
The income you wish to shelter must be earned within Puerto Rico. For business owners, this typically means offering services to clients outside Puerto Rico while physically performing the work on the island.
📌 Apply for a Tax Decree
You’ll need to formally apply for Act 60 benefits, including paying associated fees and committing to certain compliance obligations.
📌 Operate a Local Business Entity
If you’re a consultant or business owner, your business must be registered and active in Puerto Rico.

Key Considerations for Business Owners

If you’re considering relocating to Puerto Rico, there are some crucial details to keep in mind:

Consulting Income

If you’re a consultant, only income earned from services performed in Puerto Rico for clients outside the island qualifies for the reduced tax rate. It’s critical to document where and how your work is performed to ensure compliance.

K-1 Distributions

If you’re part of an LLC or partnership, K-1 income sourced from the mainland U.S. might not qualify for Act 60 benefits. Understanding the nuances of income sourcing is key to maximizing your savings.

Relocation Costs

Relocating your business and personal life isn’t free. Consider the costs of moving, establishing residency, and adapting to a new market environment.

Compliance

Act 60 has strict requirements. You’ll need to file annual reports, meet physical presence tests, and ensure your income qualifies for the incentives. Working with a knowledgeable CPA is essential to staying on track.

Challenges and Risks of Act 60

Act 60 can offer substantial tax savings, but it’s not without its challenges:

💡 IRS Oversight: While Puerto Rico offers significant tax benefits, these are subject to federal scrutiny. Missteps can result in audits or penalties.
💡 Complex Regulations: The rules around qualifying income, residency, and compliance can be difficult to navigate without professional guidance.
💡 Not for Everyone: If your income primarily comes from U.S.-based sources or you can’t meet the residency requirements, the benefits may be limited.

How Insogna CPA Can Help

Navigating Act 60’s complexities can be daunting, but that’s where Insogna CPA steps in. As trusted advisors for small business owners and high-income professionals, we specialize in creating tailored tax strategies to help you achieve your financial goals.

Our Services Include:

✅ Eligibility Analysis: We evaluate your income structure and goals to determine if Act 60 is the right fit for you.
✅ Application Support: From filing the tax decree to establishing your Puerto Rican entity, we handle the paperwork so you don’t have to.
✅ Compliance Management: We ensure you meet all residency and income requirements, so you can focus on your business.
✅ Ongoing Guidance: With quarterly check-ins and real-time financial dashboards, we keep you informed and empowered.

Is Act 60 Right for You?

If you’re an entrepreneur, consultant, or investor seeking substantial tax savings and are open to relocating, Puerto Rico’s Act 60 could be the opportunity you’ve been looking for. However, it’s essential to carefully assess your income sources, lifestyle, and compliance capabilities before taking the leap.

At Insogna CPA, we’re here to guide you every step of the way. With personalized advice and proactive support, we’ll help you make the most of Act 60’s benefits while avoiding common pitfalls.

Ready to explore your options? Contact us today to schedule a consultation.

The Major Reasons a Virtual CFO Can Help Your Business

On a basic level, a virtual CFO (or vCFO for short) is exactly what it sounds like. This is someone who performs all the services normally associated with a chief financial officer, only in a third-party capacity. Instead of going to the trouble (and expense) of hiring, training, and bringing someone with these qualifications into your organization, you’re getting access to someone who can handle all of this remotely on a schedule that works best for all involved.

This is a role that barely existed a decade ago, but technology has advanced to the point where not only is it possible, but more businesses than ever are using on-demand or part-time CFOs to help their organizations soar in increasingly competitive marketplaces. This is true for a huge variety of reasons, all of which are certainly worth exploring.

The Power of a Virtual CFO

The major reason why smaller organizations, in particular, find vCFOs so helpful is that they’re a viable way to control costs almost immediately. Rather than paying the salary to hire your own CFO in a full-time capacity (which can easily balloon into the hundreds of thousands of dollars per year once experience and benefits are accounted for), you get the services you need, in an on-demand way, for a fraction of the cost. To that end, a vCFO is really no different than managed services or similar options you may already be using.

This bleeds directly into the next major reason why vCFOs can be so beneficial: They can customize their skills and services to better meet the needs of your unique organization. Instead of paying someone for a lifetime’s worth of education, you’re only paying for the skills needed to perform the tasks at hand. Even better, the services being offered can also be adjusted on a regular basis as your business continues to grow and evolve. All of this provides you with almost unprecedented access to a wealth of knowledge that used to be out of your budget.

Leveraging Someone Else’s Experience to Your Advantage

That expertise also creates a ripple effect across your enterprise in the best possible way. You’re bringing in someone who naturally has involvement in many different companies similar to your own. This means you’re in a unique position to avoid making the same mistakes they’ve previously encountered.

But maybe the biggest advantage that a virtual or gig-based CFO brings to a company has to do with the quality of the advice being offered. This is more than just an accounting setup. The focus goes beyond simply setting up a financial structure and putting a framework in place for you to effectively manage your books.

Consider the types of challenges you’re likely to experience over the next five years. Your business will naturally get more complex as you add not only more employees but also suppliers, vendors, and all the contracts that come with them. If you go through a period of rapid growth, it can quickly cause your financials to grow out of control … unless you’re prepared for it.

A straightforward accounting setup isn’t necessarily enough to offer that much-needed level of preparation, but a vCFO is. This is a professional who has arrived with the express purpose of putting the systems in place to not only better support the current phase of your business, but the next one as well.

✅ Being Better Prepared for What Comes Next

In the end, a vCFO won’t just explain the finer details of your business’s financial situation. They’ll work with you to make sure you’re better informed about not only your current status but the pros and cons of the options available to you in the future. That level of strategic advice — and the advanced decision-making made possible because of it — would be difficult to replicate through nearly any other means.

Armed with more actionable knowledge than ever, you’ll quickly find yourself in a better position to always make the right choice at exactly the right time moving forward. This, in turn, ensures that your business can maximize profitability as much as possible over the next few years, thus allowing you to run the type of organization you always dreamed you’d one day be a part of.

If you’re a large, national organization that can afford to bring on a full-time CFO, there really isn’t any reason NOT to do so. But for most other companies, using a vCFO isn’t just an effective way to fill the types of gaps that naturally exist in your skill set — it’s a way to help your business thrive for the next 5, 10, or even 20 years in the most efficient and cost-effective way possible.

Feeling overwhelmed by your financials?

Let’s chat about how a virtual CFO from our team can make your life easier. Connect with us today, and let’s start making those financial headaches a thing of the past!

Virtual CFO Services for Your Business

Plan with a purpose. Make decisions with confidence.

❓ How are we different?

We are a licensed CPA firm in TX. Why does that matter? Anyone can call themselves a “virtual CFO” without ever being a CPA or formally trained in Accounting. Non-licensed individuals have no regulation, professional liability, or obligation to protect your data.

Our virtual CFO services solve this dilemma by providing strategic financial accounting and planning through a fractional CFO role. For a fraction of the cost of a full-time hire, you’ll be backed by our financial expertise to make key business growth decisions.

❓Why choose Insogna CPA?

Our firm not only offers virtual CFO services for small businesses but also seamlessly integrates other accounting and tax needs. Everything is communicated under one umbrella to maximize efficiency and minimize taxes as much as legally possible.

Learn more about leveraging virtual CFO in your company.

Elevate Your Business Today!

Discover how virtual CFO services can elevate your small business. Reach out to us today and let’s start planning for a brighter financial future together.

How Virtual CFO Services Can Help Your Business To Grow in 2024

You’re onto something big – a seasoned CFO who guides your financial moves to scale your business. But let’s face it, not every business has full-time CFO money to throw around. Enter our virtual CFO services – the ultimate fix.

Picture strategic financial brilliance and planning, bundled in a fractional CFO package. All the know-how, a fraction of the cost, empowering you to drive business growth in 2024.

💡 Embrace Your Future: A fractional CFO crafts a tactical financial roadmap, diving into accruals, cash flows, budgets, and streamlined processes.
💡 See Tomorrow Today: Know your path. Your CFO spots the vital KPIs, tackles inventory hiccups, and architects a full-throttle growth strategy.
💡 Measure Beyond Numbers: Your CFO unveils in-depth financial analyses, tracks cash flows, pinpoints risks, and lights up profit-boosting avenues.
💡 Conquer Your Goals: Building big or cashing out, a fractional CFO handles leadership structure, venture capital insights, and merger/acquisition game plans.

Ready to take your business to the next level in 2024?

Connect with us today and discover how our virtual CFO services can transform your financial strategy. Your future self will thank you!

5 Ways an Outsourced CFO Makes You a Rockstar CEO

Ever feel like you’re juggling a million tasks at your business? Marketing, sales, operations – it’s enough to make any business owner want to pull their hair out. But what if you could add a financial mastermind to your team without the hefty price tag of a full-time CFO? Enter the glorious world of outsourced CFO services.

At Insogna CPA, we’re not just number crunchers (although we do that really well too). We’re your financial wingman, helping you with business challenges and helping with the financial stuff you don’t want to do. Here’s how:

1. Budgeting and Forecasting

Let’s face it, budgets and forecasts are about as exciting as watching paint dry. But what if they could be your secret weapon for growth? Our virtual CFOs create clear, actionable budgets and real-time forecasts that show you exactly where your money’s going and give you the knowledge to make financial decisions. No more flying blind by just looking at your bank account – just smooth sailing towards your financial goals.

2. Stop Spending Leaks Like A Superhero

You wouldn’t leave the faucet running, so why let unnecessary expenses drain your profits? Our experienced CFOs analyze your spending habits, pinpoint areas for improvement, and identify trends that might be impacting your bottom line. Think of them as financial superheroes saving you from the evil villain of wasted cash.

3. Make Smarter Decisions, Faster

Growing a business is a whirlwind of choices. Should you invest in that new equipment? Expand to a new market? Our virtual CFOs provide expert financial guidance to help you make informed decisions with confidence. We’re your resource to bounce the risks and rewards with, so you can make the best decisions with the best data while building your empire.

4. Unleash the Power of Data

Data may not be as glamorous as the latest marketing fad, but it’s the key to unlocking your business potential. Our CFOs translate complex financial data into clear, actionable insights through custom dashboards. No more information overload – just the insights you need to stay ahead of the curve.

5. Tax Time Triumph

Tax season shouldn’t be a horror story. Our virtual CFOs work hand-in-hand with our experienced tax experts to ensure you’re taking advantage of every tax-saving opportunity available. We’ll keep you compliant and put more money back in your pocket, where it belongs.

Don’t wait until next tax season to regret missed opportunities.

Schedule your consultation today with Insogna CPA and discover how an outsourced CFO can elevate your business. Call us today at +1 512-891-8200.