Fortify Your Act 60 Decree: A Defensive Guide to Income Sourcing

In an audit, your primary defense for claiming Act 60 benefits on consulting income is proving the service was rendered in Puerto Rico. This is non-negotiable. Any ambiguity or failure to substantiate your physical location during work activities can be exploited by auditors. Your defense must be built on a foundation of clear, contemporaneous evidence. We help you stress-test your documentation and record-keeping practices, identifying weaknesses before they become liabilities. The goal is to create a barrier of proof that is too high for an auditor to easily challenge. Your location is your defense; we help you make it impenetrable.

While your location is your shield, your client's location and your business footprint can be used as a sword against you. Auditors are trained to look for signs of a "nexus" or taxable presence in other jurisdictions. They will scrutinize your client relationships, marketing activities, and operational structure to see if you have created a connection that gives another state the right to tax you. This is a sophisticated line of attack that many decree holders are unprepared for. Our defensive review is designed to simulate this audit approach, probing for potential nexus issues that could compromise your Act 60 benefits. We help you identify and mitigate these risks before they are used against you.

Your word is not enough. In an audit, the burden of proof is on you. You must present a clear, consistent, and credible trail of evidence that your income was correctly sourced. This means more than just a few receipts; it means a comprehensive file of documentation that tells a consistent story. This includes contracts, invoices, timesheets, travel records, and digital footprints. A weak or inconsistent audit trail is an invitation for a prolonged and costly examination. Act 60 Shield helps you evaluate the strength of your audit trail, providing concrete recommendations for fortifying your documentation so you are prepared to defend your position with confidence.

For consultants who work both inside and outside of Puerto Rico, a defensible income allocation methodology is critical. You cannot simply guess or use an arbitrary percentage. You must have a reasonable and consistent method for separating PR-sourced from non-PR-sourced income. This methodology will be a key focus in any audit. We help you review your allocation method for reasonableness and consistency, ensuring it is based on verifiable data like days worked, hours logged, or project milestones. A robust allocation methodology is a key component of a strong defensive posture, demonstrating your commitment to accurate compliance.