!!! ATTRIBUTION & NOT BEING AN ASSHOLE 101 !!!
I just translated the article, so I only deserve credit for the translation.
Even so, this is not your translation to copy-paste to your for-profit blog.
Link to this translation instead.
(It’s not that damn hard to write about this in your own words, lazy bloggers.)
ALWAYS (ALWAYS!) credit the original article and its authors when reporting on the story.
Article Link: http://www.dr.dk/Nyheder/Penge/2013/03/03/03201749.htm
Article Authors: Michael Lund og Niels Fastrup at DR
The state has missed roughly $1B following Microsoft’s acquisition of Danish Navision in 2002. The IT giant has been slapped with the biggest tax suit in Danish history.
By Michael Lund and Niels Fastrup
The Danish IT giant Microsoft owes the Danish government a total of 5.8 billion Danish kroner ($1.011B, ed.)
So say Skat (Danish IRS, ed.) who in these weeks are in negotiations with Microsoft and the U.S. tax autorities, trying to collect the enormous amount, DR2 (Danish Radio 2, ed.) have learnt.
If Skat succeed in collecting the money, the amount would finance a new “superhospital”, the upcoming Silkeborg motorway between Herning and Århus, or 15,000 public-school teachers.
At Christiansborg (Danish parliament, ed.), the case is cause for applause.
Some of what we wanted with Skat’s monitoring of multinational companies is exactly this, to uncover these types of cases, says Jesper Petersen, spokesperson on tax from SF (Socialistic People’s Party, a member of the Danish government, ed.).
The case is tied to Microsoft’s acquisition of the Danish IT success Navision. The Danish company, which, amongst others, was owned by the brothers Erik and Preben Damgaard, had developed a successful piece of financial-management software called Navision that Microsoft wanted their hadns on.
Thus, Microsoft acquired Navision in 2002 at 10.8 billion kroner ($1.883B, ed.), and the company name was changed to Microsoft Business Solutions.
Shortly after the acquisition, Microsoft moved the rights to the financial-management software from its new, Danish company to the tax shelter Ireland. That’s the manoeuvre Skat has been investigating.
According to Skat, Microsoft’s Irish subsidiary company bought the valuable rights much too cheaply from the Danish subsidiary. In this way, Microsoft could move large assets out of Denmark without the assets being subjected rightfully to the national taxes, Skat believes.
Altogether, Skat concludes that Microsoft owes the government 5 billion kroner in taxes after the Navision deal. With interests, the total amount today is 5.8 billion kroner, DR2 has learnt.
It is a remarkably big case, definitely one of the biggest we have ever seen. I understand Skat’s concern and subsequent investigation, assesses associate professor at CBS (Copenhagen Business School, ed.) and expert in accounting Lars Kiertzner, who along with DR2 has looked over the records of the former Navision, Microsoft’s American parent company as well as its Danish subsidiaries.
We are talking about a very encompassing case that is already a couple of years old. Due to the scope of the case, it is Microsoft Corporation in the United States that has handled it from the beginning. The Danish part of Microsoft has not had anything to do with it, says a central source with knowledge of the case to DR2.
Technically, this is a so-called transfer-pricing case. The rules state that when companies in the same corporation deal with each other across country borders, the internal settlement price—the transfer price—is determined by market conditions.
The internal deal must also occur at the same price that two independent companies would agree on. Otherwise, the companies can use the the method to remove profits to tax shelters. In this case, Skat believes that Microsoft set the price on the rights for Navision much lower than market value.
The Navision software today is named Dynamics NAV and is still developed in Microsoft’s Danish affiliate with 600 employees in Vedbæk north of Copenhagen. The different versions of the software generate a yearly sum of about ten-billion kroner ($1.743B, ed.) for Microsoft.
Since the rights for the software are in Microsoft’s Irish company, the profits from the sales are not taxed in Denmark. Instead, the income from the IT software ends up at the Irish company, which is owned by companies in Bermuda and the British Virgin Islands, as revealed by DR2’s mapping of the corporate structure of Microsoft.
For a long time, Microsoft has drawn the attention of tax authorities across the world. The company’s clever construction of corporation-bound companies makes it fairly easy to funnel profits from the different subsidiaries to tax havens where practically no corporate tax is paid.
Neither Skat, Microsoft nor the American tax authority IRS wish to comment on the on-going tax suit to DR2.
(Rough and quick translation follows.)
When companies in the same corporation deal with each other across national borders, the internal settlement price—the transfer price—must must happen on market conditions. The internal deal must thus happen at the same price that two independent companies would agree on. Otherwise, the corporation can use the method for moving profits to tax shelters.
In the Microsoft case, Skat believe that Microsoft have priced the rights of the Navision software much lower than the market price at the time where the IT giant let its Irish subsidiary buy the rights from its Danish subsidiary.
According to Skat, the manoeuvre meant that the Danish company was emptied of assets at too low a price. That meant a lower income for the Danish subsidiary—and thus a smaller profit subject to taxation in Denmark.
In total, Skat have increased the income in Microsoft’s Danish subsidiary for earlier income years by almost 11 billion kroner ($1.922B, ed.). From this amount, taxes worth five billion ($873.6M, ed.) and 0.8 billion ($139.8, ed.) in interest need to be paid, DR2 have learnt.
!!! ATTRIBUTION & NOT BEING AN ASSHOLE 101 !!!
I just translated the article, so I only deserve credit for the translation.
Even so, this is not your translation to copy-paste to your for-profit blog.
Link to this translation instead.
(It’s not that damn hard to write about this in your own words, lazy bloggers.)
ALWAYS (ALWAYS!) credit the original article and its authors when reporting on the story.
Article Link: http://www.dr.dk/Nyheder/Penge/2013/03/03/03201749.htm
Article Authors: Michael Lund og Niels Fastrup at DR
If you see anyone plagiarizing this translation, here is an invitation to name and shame them in the comments.
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