About taxes in Puerto Rico
Puerto Rico is a US territory with its own income tax system. Bona fide residents pay no US federal income tax on Puerto Rico-source income under IRC §933, but they do pay Puerto Rico income tax to Hacienda on a progressive scale (0%, 7%, 14%, 25% and 33%, plus a gradual-adjustment surcharge on very high incomes) and full FICA — 6.2% Social Security up to the wage base and 1.45% Medicare — as well as the small SINOT disability contribution. Act 60 (the 2019 Incentives Code) is often misunderstood: it never exempts salary. A Chapter 2 Individual Resident Investor decree reduces Puerto Rico tax to 0% on qualifying PR-source passive income (dividends, interest and capital gains accrued after you become a bona fide resident), while a Chapter 3 Export Services decree taxes the business's net profit at a fixed 4% before it is distributed to the owner, who still has to pay themselves a reasonable salary taxed at ordinary rates.