Danish Government Seeks $1 Billion in Back Taxes from Microsoft

The Danish government is seeking nearly $1 billion in back taxes from software giant Microsoft (News - Alert) over an acquisition it made more than a decade ago. Reports indicate that it is one of the biggest tax cases in Denmark’s history.

The Danish tax authority is in negotiations with Microsoft over unpaid taxes resulting from the $1.88 billion takeover of Danish software company Navision in 2002. It claims that Microsoft sold the rights to Navision's successful business planning software, now under the name of Dynamics NAV, at below market value to a subsidiary in Ireland.

The tax authority is claiming 5.8 billion crowns ($1 billion) in back taxes and interest from sales of Dynamics NAV. However, reports indicate that a Microsoft representative in Denmark declined to comment on this development as did the Danish tax authority.

In February, the Danish government proposed to gradually lower the corporate tax rate to 22 percent from 25 percent. The corporate tax in Ireland can be as low as 12.5 percent, depending on the type of business.

A post on the LinuxInsider tech blog indicates that European nations are increasingly trying to close tax loopholes used by U.S. technology corporations. For instance, the U.K. continues to grill the likes of Amazon and Google (News - Alert) over their legal, but clever, accounting practices. Australia has also joined the fight to close loopholes in accounting practices that funnel money via a few other countries.