Microsoft May Owe Denmark More Than $1 Billion in Back Taxes

Paul Lilly

An acquisition Microsoft made more than a decade ago could result in a massive tax bill in Denmark.

Everyone has their own reasons for hating Mondays, but no matter how long your work week is looking right about now, at least you didn't wake up this morning to a $1 billion tax bill. Microsoft did, or so says DR News , a news outlet based in Denmark. According to the report, Microsoft owes the Danish Treasury a total of 5.8 billion kroner (about $1.01 billion) related to a 2002 acquisition of Navision, a Danish software company.

Denmark claims Microsoft sold the rights to Navision's business planning software, now called Dynamics NAV, at below market value to a subsidiary in Ireland. In doing so, Microsoft is able to move Navision's profits overseas where taxes are cheaper than they are in Denmark. Taxes in Ireland can be as low as 12.5 percent, versus 22-25 percent in Denmark.

Microsoft's maneuver didn't fly with the Denmark Treasury, which now wants to collect back taxes and fees.

For Microsoft, it's another potential huge bill, and the timing couldn't be any worse. Just last week, Reuters reported that the European Union was getting ready to fine the Redmond software giant for violating its browser ballot agreement. That fine could be as much as 10 percent of its total annual revenue, or around $7.4 billion.

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