Billion-dollar Danish: Microsoft owes Denmark $1 billion
in unpaid taxes, treasury says
By John Koetsier at VentureBeat
Mon Mar 4, 2013 6:03pm EST
That's one expensive Danish.
Microsoft owes the Danish treasury 5.8 billion kroner, or
about $1 billion U.S., in unpaid taxes relating to its purchase of financial
software vendor Navision in 2002, says the Denmark treasury.
Most tech companies avoid taxes by leaving foreign income
overseas or by routing it through Irish or other low-taxation districts, and
that's happening in this case as well. But this case is not primarily, or at
least initially about earnings. Rather, this is about Microsoft's acquisition
and transfer of the fundamental assets of Navision to low-corporate-tax
regions.
VentureBeat is seeking a comment from Microsoft.
Microsoft bought the company in 2002 for $1.5 billion. So
far, all well and good.
The tricky part, according to Denmark, is that Microsoft
then transferred its rights in what used to be Navision - the money-making assets - to an Irish
subsidiary. And Denmark says that was done at a vastly unfair market value,
which is illegal according to taxation rules, says local press agency Nyheder.
On top of this, revenues from the software that former
Navision and current Microsoft Business Solutions sells is on the order of a
billion dollars a year. (It's worth noting that Microsoft's business software
unit consists of more than just a renamed Navision.) That revenue has been
routed through Ireland via a Microsoft subsidiary which is in turned owned by
companies in Bermuda and the British Virgin Islands, according to Nyheder.
All three of those countries are well-known low-corporate
income tax regions.
Governments in Europe and the U.S. are increasingly aware
of the complex and obscure ways that international corporations, often
U.S.-based, are using to avoid paying tax. This is just one of the first cases
in which a European government is attempting to claim and obtain that lost tax.
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