Microsoft, a global technology leader, revealed on Wednesday that the U.S. Internal Revenue Service (IRS) had notified the company in September about an additional tax payment demand of $28.9 billion, plus penalties and interest, covering tax years from 2004 to 2013.
The IRS notices are linked to an ongoing dispute between Microsoft and the U.S. tax authority, focusing on the allocation of profit by Microsoft across various countries and jurisdictions.
The main disagreement is the way Microsoft allocated profits during this time period among countries and jurisdictions. This is commonly referred to as transfer pricing and the IRS has established regulations that allow companies to use a specific arrangement for transfer pricing, called cost-sharing, the software maker said.
Microsoft, headquartered in Redmond, Washington, stated that it has modified its practices since then to ensure that the issues raised by the IRS are pertinent to the past and not reflective of their present practices, as highlighted in a Microsoft blog.
Microsoft believes that any taxes owed post-audit could be reduced by up to $10 billion, based on tax laws enacted during the tenure of former President Donald Trump.
Expressing disagreement with the IRS’s findings, Microsoft plans to challenge them, initially through an internal IRS proceeding and subsequently, if necessary, in courts. Since 2004, we have paid over $67 billion in taxes to the U.S.
The IRS, as per U.S. law, is restricted from confirming or denying whether it is currently auditing any taxpayer.