Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Microsoft NZ and IRD officially at odds over tax

Microsoft NZ and IRD officially at odds over transfer pricing


By Paul McBeth

Nov. 19 (BusinessDesk) - Microsoft New Zealand and the Inland Revenue Department are officially at odds after a lengthy audit of the software giant's local books.

IRD has been auditing Microsoft's transfer pricing since at least January last year, initially covering the June 2013 to June 2015 financial years. The tax department later extended that through June 2017.

Microsoft first acknowledged the audit in its 2016 annual report. In the 2018 annual report, the directors again noted that they and their legal advisers believed the company had adequately assessed and provided for its tax through the period, while acknowledging the final outcome wasn't certain.

The latest accounts say the matter is now in a formal tax dispute resolution process. The IRD's website says the process starts with a notice of proposed adjustment and response, followed by a conference, after which the respective parties put forward their positions. An IRD unit staffed by independent experts then reviews the matter, and if either party is still unhappy it can be taken to either the Tax Review Authority or the High Court.

"No further information relating to the dispute has been disclosed on the basis that it is considered legally sensitive and may be detrimental to the company to do so," the annual report said.

Microsoft NZ's tax expenses through the 2013 to 2017 periods totalled $25.6 million. Over the same period, it generated $80.6 million in pre-tax profit, a margin of about 16.7 percent to its revenue of $483.6 million. Its effective tax rate through the period was 31.8 percent - that's higher than the base 28 percent corporate tax rate because of non-deductible items such as share-based payments.

Microsoft changed the way it recognised revenue during the period. From February 2018, the local unit's accounts were extended to include the distribution of computer software and hardware, having previously covered marketing. The change effectively means local product sales are being captured. A popular way for multinational firms to minimise their around tax bill is to book sales in a low-tax jurisdiction.

Still, the latest change didn't affect Microsoft's New Zealand income tax expense, which fell to $5.1 million from $6.6 million a year earlier due to another legislative change that resulted in a tax deduction in future periods for share-based staff payments. That's also lowered its effective tax rate to 23.9 percent in the latest year.

The cashlow statement showed an increase in income tax paid to $8 million from $6.7 million. The changes to Microsoft's revenue recognition also seem to route GST through the local unit, with GST payments of $8.1 million in the year ended June 30, compared to just $13,441 a year earlier.

Parliament this year passed legislation aimed at reducing multinational transfer pricing tax strategies. Papers accompanying the bill showed IRD was auditing 16 firms involving an annual $100 million of disputed tax.

Including five months of the new revenue recognition, Microsoft NZ generated revenue of $184.1 million in the 12 months ended June 30 compared to $115.2 million a year earlier. The new accounting method also introduced $69.6 million of sales and distribution expenses. Net profit increased to $16.2 million from $14 million a year earlier.

(BusinessDesk

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Stats NZ: Election Boosts October Job Numbers

Job numbers were boosted by general election staff in October 2020, along with rises in the manufacturing, retail, and hospitality industries, Stats NZ said today. Filled jobs rose by 27,667 to 2.2 million in October 2020 compared with September, after ... More>>

Government: New Year Border Exception For Seasonal Workers In The Horticulture And Wine Industries

2000 additional RSE workers to enter New Zealand early next year employers must pay these workers at least $22.10 an hour employers will cover costs of managed isolation for the RSE workers RSE workers will be paid the equivalent of 30 hours work a week ... More>>

ALSO:

Grey Power: Is Disappointed To Learn Of More Bank Closures

Many older people are being left without essential services because of cost cutting and the march of modern technology. It is now expected that most banking transactions can occur via the internet or telephone. Jan Pentecost, President of the Grey Power ... More>>

ALSO:


Department Of Conservation: Big Year Underway At Albatross Colony

Familiar faces are returning for the new season of Royal Cam, with a big breeding year underway for the toroa/northern royal albatross colony on Otago’s windswept Pukekura/Taiaroa Head. More than 120 albatrosses, a taonga species, have returned ... More>>

Real Estate: ASB Survey Reveals Majority Of Kiwis Expect House Prices To Keep Climbing

ALSO:

House price expectations are soaring as New Zealand’s housing market shifts up a gear. But stretched affordability is putting a dent in perceptions of whether it’s a good time to buy. While Kiwis reveal they do expect interest rates to fall further. ... More>>

ComCom: How Real Is That Bargain?

The Commerce Commission urges retailers and consumers to think hard about the bargains being offered as ‘Black Friday’ and Christmas draw near. Black Friday has now overtaken Boxing Day in terms of retail spending, according to data from electronic ... More>>

Stats NZ: Births And Deaths: Year Ended September 2020

Births and deaths releases provide statistics on the number of births and deaths registered in New Zealand, and selected fertility and mortality rates. Key facts For the year ended September 2020: 57,753 live births and 32,670 deaths ... More>>

ALSO: