Microsoft shifted IP here after US tax cut
Microsoft moved intellectual property (IP) to Ireland as well as the US after Donald Trump slashed the corporate tax rate last year, and gained $2.6bn (€2.3bn) from the shift, the company said.
Microsoft beat analysts' estimates for fourth-quarter revenue and profit on Thursday night, driven by continued sales increases from its cloud business, and sending its shares to all-time highs.
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In a note to the accounts, Microsoft said that after Mr Trump's sweeping Tax Cuts and Jobs Act, which slashed corporation tax in the US in part to encourage companies to repatriate assets, that it transferred "certain intangible properties" from foreign subsidiaries to the US and also to Ireland in the fourth quarter of the 2019 financial year.
The transfers resulted in a net $2.6bn tax benefit because the value of tax deductions exceeded the existing tax liabilities.
Income generated by those assets now looks set to be taxed in the US and Ireland in the future.
The accounts show cloud computing growth powered Microsoft's market value past $1trn for the first time in April. On Thursday, Microsoft's Azure-based business segment for the first time ever reported slightly more quarterly revenue than its Windows-based segment.
Since chief executive Satya Nadella took over in 2014, Microsoft has been shifting away from its Windows operating system software and toward cloud services, in which customers move their computing work to data centres managed by the firm.
"The pressure was obviously on but they executed," said Hal Eddins, chief economist for Microsoft shareholder Capital Investment Counsel. "The cloud is such a key driver of growth for them and they seem to have painted a big bullseye on the back of AWS."