How Microsoft’s Puerto Rico Structure Reduced Its Tax Rate — And What Individuals Can Do With PR Act 60
Microsoft has routed substantial IP and manufacturing through Puerto Rico for tax reasons for decades. For US individual founders, PR Act 60 offers a related (but different) legitimate benefit — with genuine relocation required.
Last edited 9 August 2026 - Authors: Joe Hanson, FTR Director & Global Partner, with input and advice from FTR’s LATAM Tax Partners.
The Microsoft Structure
Microsoft has used Puerto Rico’s favourable tax framework for decades — historically for CD/DVD manufacturing (physical fulfilment of software) and later for IP licensing. Puerto Rico is a US territory but with its own tax framework offering meaningful advantages for qualifying activities. Various IRS audits and disputes have contested aspects, but the underlying structure has been broadly successful.
The Individual Version: PR Act 60
For US individual founders, PR Act 60 (formerly Acts 20 and 22) offers something different but related:
Individual Investor: 0% Puerto Rico tax on qualifying capital gains and interest/dividend income arising after bona fide PR residence begins
Export Services: 4% corporate tax on qualifying export services performed from PR
The catch: you must become a genuine PR bona fide resident. This is not a paper residency. Physical presence (183+ days), tax home in PR, and closer connections to PR than to any other jurisdiction are all required.
Why This Works Legally for US Citizens
Puerto Rico is a US territory. US federal income tax generally does not apply to PR-source income earned by PR bona fide residents (Section 933).
Combined with Puerto Rico’s own favourable rates for qualifying activities, this creates a legitimate legal structure — one of the very few legal paths for US citizens to substantially reduce US individual income tax without renouncing citizenship.
What FTR Sees
For US-citizen entrepreneurs with meaningful capital-gain-generating businesses (SaaS about to sell, crypto investors, hedge fund principals), Puerto Rico Act 60 is often the single best legal tax planning move without leaving the US. It requires:
Genuine relocation (not a mailing address)
Ongoing physical presence
Real economic activity in PR (for Act 60 corporate benefits)
Careful timing around asset realization events
Common pitfalls: relocating AFTER a major sale (much of the gain is US-taxable); insufficient physical presence; failing bona fide residency tests; ongoing significant US business activities that create ECI.
Next Steps
Need help with legitimate tax planning, international structural planning for your growing business or your personal portfolio? Book a scoping call.
We don’t time-bill and the initial call is free - click the ‘Book a Consultation’ button or email us at hello@ftr.finance today.
Important note: This article is general information for readers considering cross-border retirement or asset structuring. It is not personal tax, legal, or financial advice. Tax laws, visa rules, and treaty positions change regularly, and how they apply to you depends on your specific facts, citizenship, source of income, and prior tax history. Speak to a qualified adviser at FTR or elsewhere before acting on anything in this article.