The IRS told Microsoft that the company owed $29 billion in taxes, plus penalties and interest, for the tax years 2004 to 2013, according to a Securities and Exchange Commission filing.
Daniel Goff, Microsoft's vice president of global tax and customs, responded to the audit in a blog post: "The company has changed its corporate structure and practices since the years covered by the audit. » The questions raised by the office relate to the past and are unrelated to our current practice."
Goff said the IRS's proposed adjustment does not reflect the amount the company paid under the 2017 Tax Cuts and Jobs Act, which he said could reduce the final tax due by about $10 billion.
Microsoft also claimed that the IRS disapproves of the way Microsoft distributes its profits internationally through transfer pricing arrangements called cost sharing. This is how companies shift their profits to tax havens and avoid US corporate tax rates.
In 2012, Microsoft shifted billions of dollars in profits to jurisdictions like Puerto Rico, a US territory that charges companies much lower prices.
Microsoft said it disagrees with and strongly opposes the change proposed by the IRS, and said in the same blog post that it does not expect the dispute to be resolved within the next year.
The case concerns the distribution of the company's profits between various countries and jurisdictions between 2004 and 2013. The company plans to challenge the communications through administrative complaints to the IRS and is prepared to take legal action if necessary.
“Microsoft does not agree with these proposed changes and will continue to appeal to the IRS, a process expected to take several years,” the company said. “We believe we have complied with IRS rules and paid our dues in the United States and around the world.
In addition, the software company has already won a case against the Federal Trade Commission, which failed to obtain an injunction against Microsoft's planned acquisition of Activision Blizzard for $68.7 billion. The deal is expected to close on October 13.