Business Irish

Monday 21 October 2019

Microsoft cuts five-year tax deal with State

Revenue and software giant agree tax terms

An attendee is silhouetted against a Microsoft Corp. poster as he rides an escalator at the Microsoft Developers Build Conference in San Francisco, California, U.S. Photographer: David Paul Morris/Bloomberg
An attendee is silhouetted against a Microsoft Corp. poster as he rides an escalator at the Microsoft Developers Build Conference in San Francisco, California, U.S. Photographer: David Paul Morris/Bloomberg

Nick Webb & Roisin Burke

MICROSOFT, the world's biggest software company, has agreed a deal with the Revenue Commissioners on tax payments.

Company documents say that the Bill Gates-founded firm entered into an agreement on tax with the Irish authorities that runs until 2017. The deal relates to how money is channelled between the company's British and Irish divisions. As with many multinational companies, Microsoft runs its British and other European and international operations out of Ireland.

The five-year deal started in 2012 is connected to an "advance pricing agreement" on monies paid to Microsoft Limited for "the services it renders to group companies", according to the documents filed by its UK operations.

The British division of Microsoft is paid a fee for providing "marketing and support services to other group companies". This fee is bel- ieved to be connected to the five-year agreement with Revenue. Microsoft's British sales registered in Ireland were €2.30bn in 2012, according to its accounts.

"As part of our long-term business planning, Microsoft Ltd has entered into an advanced pricing agreement (APA) with HMRC and the Irish Revenue. APAs are the result of a direct negotiation between the relevant tax authorities. Microsoft provides both countries a full and complete account of its operations and transfer pricing, but does not participate in the completion of the negotiation process between the two tax authorities," a spokeswoman told the Sunday Independent.

"In the UK, we have consistently paid all corporation tax due which, in the last three years alone, has amounted to more than stg£59 million. Like many other global firms, we maintain – for more than two decades now – a significant European regional headquarters based in Ireland; our Microsoft operation in Ireland supports approximately 1,700 staff who develop, produce, distribute and sell Microsoft products throughout Europe, the Middle East and Africa (EMEA). Consequently, our operations in Ireland generate the vast majority of our EMEA product revenue. The income from the sale of Microsoft products sold and distributed across the EMEA region is fully taxed in Ireland."

A clampdown on tax minimising schemes operated by some multinational companies in Ireland is to be introduced in September, according to a draft report from the OECD. A year from that, more measures will be added to curtail firms paying tax in places other than the market where sales are actually generated.

The Irish Government has been keen to have issues regarding multinationals' sometimes controversial tax structures in Ireland addressed through Europe-wide or global tax measures rather than by Ireland individually.

Like Google, Apple and some other international companies based here, Microsoft has operations in Ireland that process sales for its European and other markets. In some cases, monies from royalties and patents are channelled through offshore tax havens like Bermuda, reducing the amount of tax paid in Ireland.

Last year, a US Senate committee criticised what it called "dubious" practices by Microsoft of funnelling profits through international subsidiaries in Ireland and Singapore, accusing it of avoiding paying billions in US tax.

Sunday Indo Business

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