Microsoft hit with $140 million fine in China for tax evasion

Microsoft is slated to pay Chinese authorities 840 million yuan (roughly $137 million) in back taxes and interest, according to a report by state-sponsored news agency Xinhua. In addition, the Redmond-based software company is on the hook for an additional 100 million yuan tax payment next year. The report doesn’t mention Microsoft by name, but says that the company involved in the tax evasion case is among the 500 largest in the US, has the first initial “M,” and opened its Chinese subsidiary in Beijing in 1995. Microsoft is the only company that fits those criteria.

China has levied about $140 million in back taxes from Microsoft Corp in the first major case concerning cross-border tax evasion in the country, as regulators ramp up pressure on U.S. corporations doing business there. According to an article published by China’s Xinhua official news agency on Sunday, an unnamed U.S. multinational must pay the Chinese government 840 million yuan ($137 million) in back taxes and interest, as well as more than 100 million yuan in additional taxes a year in the future. The article refers only to a company whose name starts with “M,” and is one of the world’s biggest 500 firms and which established a wholly owned foreign subsidiary in Beijing in 1995. Microsoft is the only company that fits that description. The Redmond, Washington-based company did not confirm the report, but also did not deny that it was the company involved. “In 2012 the tax authorities of China and the United States agreed to a bilateral advanced pricing agreement with regards to Microsoft’s operations in China,” said a Microsoft spokesman in an emailed statement. “China receives tax revenue from Microsoft consistent with the terms of the agreed advanced pricing agreement.”