Microsoft (MSFT) Hit With $140M Tax Evasion Bill in China

U.S. software giant Microsoft Corporation (MSFT) has agreed to pay 840 million yuan ($137 million) to Chinese Government in back taxes, according to a Reuters report late Tuesday. The previous report of the tax fine, from the official Xinhua News Agency, said that a U.S. multinational company, which the publication referred to only as ‘Company M,’ will have to pay the Chinese government $140 million in back taxes and interest, and would also shell out an additional 100 million yuan in additional taxes every year.

“Because the amount involved is huge and the impact is enormous, this case has been called China’s first major anti-tax evasion case,” the report said, adding the case “highlights the common tactic of multinationals to avoid tax, by transferring profits through various countries, taking advantage of differences in their tax rates.”

According to Xinhua, ‘M’ reported successive losses for six years in China amounting to more than 2 billion yuan, while its industry peers enjoyed profits. The anomaly led the tax authorities to conclude the company’s behavior was unreasonable. The report noted that the U.S. company admitted to tax evasion by having transferred massive profits from its China unit to the U.S., and that its mainland subsidiary had agreed to pay the central government.

The tax fine is the latest issue Microsoft is tackling in China, where the software giant is already under investigation by anti-trust regulators.

Microsoft shares were up 0.04% to $47.49 at 6:07 a.m. EST.

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