Microsoft faces €52.5m tax bill hike in France

Microsoft faces €52.5m tax bill hike in France

Summary: In France Microsoft is facings its third tax reassessment in five years, according to a report.

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TOPICS: Microsoft, Legal, EU
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Microsoft is facing an extra €52.5m added to its tax bill in France – its third tax reassessment in five years and its biggest during the period.

The reassessment relates to its 2007, 2008 and 2009 financial years, according to French TV channel BFM TV. It comes as a result of a tax audit in 2010 that looked into the fees paid by the local branch of the company to its main shareholder, Microsoft Ireland (Microsoft's European headquarters and main centre of business in the continent are located in Dublin).

In France, Microsoft acts as a 'commission agent' for Microsoft Ireland and gets a fee on every deal signed between the company and French customers. The French income tax department has looked into the amount of those fees, and now believes Microsoft owes an additional €52.5m in tax, BFM reports.

Whether Microsoft will have to pay the extra amount remains to be seen: the company has faced similar reassessments before and in 2005 lodged a complaint with France's tax commission (Commission Nationale des Impôts Directs) that saw the reassessment overturned. Microsoft disputes the current reassessment and has again lodged a complaint. (Microsoft did not immediately respond to request for comment.)

Having local subsidiaries that act as commission agents for a main shareholder based in a country with lower tax levels is one of the well-known tax optimisation practices used by large online companies.

Though legal, such practices also recently caught the eye of the OECD (Organisation for Economic Co-operation and Development), which called for better international co-operation in order to address taxation "base erosion and profit shifting".

One answer to the issue could at least partially come from a proposed European directive (PDF) for a Common Consolidate Corporate Tax Base (CCTB) – a way to set up a common tax base for companies that operate across a number of EU countries. Proposed by the European Commission back in March 2011, the directive "aims to tackle some major fiscal impediments to growth in the Single Market. In the absence of common corporate tax rules, the interaction of national tax systems often leads to over-taxation and double taxation, businesses are facing heavy administrative burdens and high tax compliance costs. This situation creates disincentives for investment in the EU." But such measures move slowly: the proposed directive is the result of discussions started back in 2003.

Topics: Microsoft, Legal, EU

Valéry Marchive

About Valéry Marchive

A graduate in networking and databases and an author of several books about Apple gear, Valéry Marchive has been covering the French IT landscape since the late 90s, both for the consumer and enterprise sectors.

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5 comments
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  • No surprise there. Socialism fails economically

    and money grabs are always part of the desperate acts to prop it up when the traditional population based pyramid schemes fail. When your policies have effectively put everyone in the cart you need to look outside your own economy for someone else to pull it for you. Who would the socialists running France be turning to if open source had taken off and profitable companies weren't there to ream?
    Johnny Vegas
    • Blaming Socialism ?!

      OpenSource doesn't mean you're not spending money.
      But with OpenSource you're most likely to spend money with local companies.

      And being Socialism or whatever is, as a country you're looking for company to play with your rules within your market.

      And to conclude, as said in the article: "The reassessment relates to its 2007, 2008 and 2009 financial years", and the tax audit was done in 2010, when Nicolas Sarkozy was president and now its the result.
      Do you consider him as a socialism ?
      Frédéric Forjan
      • He's a troll, actually...

        ...and apparently one who believes that MS can do no wrong.

        But to many U.S Conservatives, "socialism" is a perjorative used for any public policy or practice they oppose, regardless of whether or not it was ever advocated by the historic socialist movement (which never had broad support in the U.S.). The term also has some association with Communism in the minds of many Americans, which has been exploited by ultraconservative commentators since at least the 1940s.

        There are those who think that the first socialist president of the U.S was Abraham Lincoln (a pro-business conservative, according to most accounts).
        John L. Ries
  • Typical france....

    They been bit*hin and moaning bout irelands corprate tax rate for the last 5 years... The only reason Microsoft (and every major tech company inc. Apple, Orical, IBM, Intel, Google, Ebay, Paypal and about 100 others) even are here is because of our super low tax... thats why france proposed CCTB... Sorry but Ireland dont have much to its name... not like france, germany or italy or even the uk... If we got rid of our low tax (Ireland having one of the highest wage rates in Europe) all those companies would leave where labour is cheap... sorry but screw france...
    Skunkwurx
    • Typical non-europe country ?

      Do you consider Ireland as part of Europe ?
      Do you consider Ireland can alone compete against China, USA or Russia ?

      Or do you consider we should try to harmonize from an Europe point of view ?
      And in this case can Europe have more power in the current world ?

      PS: oh by the way, if I remember correctly in English, it's France, Germany and Italy, please use upper case for country name as in Ireland.
      Frédéric Forjan