Microsoft (NASDAQ:MSFT) New Zealand Being Audited Over Transfer Pricing

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Microsoft Corporation (NASDAQ:MSFT) New Zealand has revealed that it is under audit from the Inland Revenue Department. Transfer pricing, a tax-avoidance measure employed by multinational companies, has been cited as the reason for the audit. A spokesperson for the company admitted to the audit while insisting that the largest software firm in the world had broken no law.

“…we pay our taxes in New Zealand. We believe tax is an issue that should be addressed at the global level, but having said that, we abide by the laws in all jurisdictions…” said the spokesperson.

Between 2013 and 2015

The audit will cover 2013 through 2015 and comes as the Inland Revenue Department is widening the review to all foreign-owned companies with over $30 million in annual revenues and requires them to submit their yearly compliance packages containing details such as financial statements, tax reconciliations, and group structure. Previously, only foreign-owned companies with annual revenue of over $60 million were required to submit the basic compliance package. The previous threshold covered about 300 foreign-owned firms and the new expanded requirement is expected to widen the net to more than 300 foreign-owned firms.

Triggered by Anomalies

In 2016, the IRD audited several global tech companies and these audits were necessitated by anomalies that came to light following investigations. For the audit period Microsoft’s revenue growth and tax payable was evident. In 2013, Microsoft New Zealand paid $3.9 million in taxes for $78.5 million in revenues. Revenues emanating from related parties were about $56 million while deposits from the related parties totaled $28 million. The money the New Zealand unit of Microsoft owed other subsidiaries elsewhere was around $5.6 million.
In 2014, $4.6 million was paid in tax against revenues of $86.8 million. Revenues from other subsidiaries under the Microsoft group rose to $60.9 million while deposits increased to $40.4 million.

Revenues rose again in 2015 to $96 million and tax of $5.2 was paid against a profit of $11 million. Revenue from related parties amounted to $69.5 million while deposits from the same were $41.7.

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