Microsoft received a notice from the U.S. Internal Revenue Service (IRS) for an additional $28.9 billion in back taxes, which the Windows maker has contested to pay.
According to an SEC filing, “the IRS is seeking an additional tax payment of $28.9 billion plus penalties and interest. As of September 30, 2023, we believe our allowances for income tax contingencies are adequate.”
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🚨BREAKING: Microsoft receives demand for $28.9B from IRS in back taxes, per Bloomberg.
Ouch. pic.twitter.com/9F3DpnCUMZ
— Genevieve Roch-Decter, CFA (@GRDecter) October 11, 2023
However, Microsoft responded saying “the issues raised by the IRS are relevant to the past but not to our current practices.” The tech giant said the dispute concerns the company’s allocated profits between countries and jurisdictions between 2004 and 2013. It said that up to $10 billion in taxes already paid for, were not reflected in the proposed adjustments made by the IRS, according to CNBC.
“Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years,” the company said in its filing. “We believe we have always followed the IRS’s rules and paid the taxes we owe in the U.S. and around the world.”
The filing stated that the primary issues in the notice of proposed adjustments (NOPA) relate to the intercompany transfer pricing. Transfer pricing is the practice of setting prices for goods and services exchanged within a company.
According to Vice President of Microsoft Daniel Goff, in 2012, Microsoft had been moving billions of dollars in profits to places like Puerto Rico, (U.S. territory) that levies a much lower corporate rate. The company changed its corporate structure and practices since before the years covered by the audit, so the issues raised by the IRS aren’t relevant to the way income is recorded currently.
Microsoft said that as of Sept. 30, 2023, it believes its allowances for income tax contingencies are adequate.
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