The levy, including USD 137 million (CNY 840 million) in back taxes, interest and more than USD 16.3 million (CNY 100 million) in additional annual disbursements going forward, was detailed in a 23 November 2014 report issued by the state-run Xinhua News Agency, which failed to name the company involved.
The case follows a series of regulatory and law enforcement actions against foreign companies operating in the country. Global car manufacturers, food companies and technology companies, including Microsoft, have faced antitrust probes in 2014.
The Xinhua report referred to the company as “Corp. M,” described it as being one of the world’s 500 biggest corporations and as having a wholly owned subsidiary established in Beijing in 1995, details that match Microsoft, the source cites.
The company drew government scrutiny because its China subsidiary has reported losses, even as its peers saw gains, the Xinhua report said. An investigation found that the unit had transferred more than half its profits to its US parent as franchise fees, the source cites.
Microsoft said in its statement that it operates in China under an agreement with local tax authorities and that China receives tax revenues from the US company in concord with the terms of the advanced pricing agreement.
In July 2014, the State Administration for Industry and Commerce said it began probing whether Microsoft’s Windows operating system and Office software violate China’s anti-monopoly law.
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