Microsoft recently reported that it is under investigation by the US Internal Revenue Service (IRS) for its tax practices between 2004 and 2013, resulting in an additional $28.9 billion (approximately 1.05 trillion baht) in potential liabilities, excluding penalties and interest.
The main issue leading to this significant back-tax bill is the disagreement between Microsoft and the IRS regarding its transfer pricing policies. Microsoft’s subsidiaries outside the US generated profits in various countries, raising concerns about how those profits were allocated among different jurisdictions.
The IRS conducted this review unilaterally, and Microsoft has expressed its disagreement with the findings and intends to fight the process. The first step would be to dispute the IRS audit findings internally, which could take several years. If an agreement cannot be reached, the case may proceed to litigation.
TLDR: Microsoft is being investigated by the IRS for its tax practices between 2004 and 2013, potentially resulting in additional tax liabilities of $28.9 billion. The main issue is a disagreement over transfer pricing policies, with Microsoft’s subsidiaries outside the US generating profits in various countries. Microsoft intends to dispute the IRS findings and may go to court if an agreement cannot be reached.