As Chinese regulators increase the pressure on US firms Microsoft has reportedly been fined $140m in back taxes related to accusations of cross-border tax evasion. This makes it the largest such tariff ever.
Not disclosing the firm’s name, Xinhua reported that a firm whose name starts with ‘M’ and with financial details similar to those of Microsoft has been fined for transfer pricing. The report added that ‘M’ generated $325m in losses for six years in China, while peers reported profits, leading the tax authorities to conclude that its actions were unreasonable, Reuters reported.
The report also claimed that the US firm confessed to tax evasion and its Chinese subsidiary had sanctioned to pay the central government.
A Microsoft spokesperson said: "In 2012 the tax authorities of China and the United States agreed to a bilateral advanced pricing agreement with regards to Microsoft’s operations in China.
"The agreement is an acknowledgment by both countries that Microsoft’s profits are subject to the appropriate tax in China.
"China receives tax revenue from Microsoft consistent with the terms of the agreed advanced pricing agreement."
