The Chinese government has charged Microsoft USD 140 million in back taxes and interest, the Financial Times reports. A report in Xinhua, the official Chinese newsagency, did not name Microsoft but said that a company whose name begins with 'M' and with financial details identical to those of Microsoft had been penalised for transfer pricing. Xinhua said that while Microsoft’s China based-business were officially lossmaking, the profits were being booked in offshore tax havens, adding that Microsoft had admitted to the tax evasion.
Microsoft contradicted much of the Xinhua article, instead saying it had agreed with Chinese authorities to pay the amount as a "bilateral advanced pricing agreement" rather than back taxes. Microsoft said the agreement dated back to 2012, and the payment confirmed to both the US and China that Microsoft’s profits are subject to the appropriate tax in China.
