China levies $140 million fine against Microsoft for tax evasion

China has levied a fine of $140 million, or 840 million yuan, against Microsoft for tax evasion. The fee would cover back taxes and interest owed. Additionally, the agreement reportedly stipulates that Microsoft would pay more than 100 million yuan in additional taxes a year in the future.

According to Reuters, China's Xinhua news agency reported the 840 million yuan fine against a company whose wholly-owned subsidiary is located in Beijing:

The article refers only to a company whose name starts with "M," 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.

Reuters said that Microsoft neither confirmed nor denied the report.

Tax authorities investigated the "M" company after it had reported losses for six years whereas its peers had profitable business operations.

It said the U.S. company admitted to tax evasion and its mainland subsidiary had agreed to pay the central government.

Source: Reuters

Chuong Nguyen

Chuong's passion for gadgets began with the humble PDA. Since then, he has covered a range of consumer and enterprise devices, raning from smartphones to tablets, laptops to desktops and everything in between for publications like Pocketnow, Digital Trends, Wareable, Paste Magazine, and TechRadar in the past before joining the awesome team at Windows Central. Based in the San Francisco Bay Area, when not working, he likes exploring the diverse and eclectic food scene, taking short jaunts to wine country, soaking in the sun along California's coast, consuming news, and finding new hiking trails. 

  • McDonald's?
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  • Aren't far left wing governments so fun for businesses? "tax evasion" pfft. I've got a feeling this Beijing extortion of American companies has just begun. Like what can we do about it? Move manufacturing back to a heavily over unionized US state? Ya right.
  • Pfft, you say that but when I was living and working in Hong Kong, it was only Americans I knew living there whose government wanted tax on cash earned there even though they live outside their Country. As an Australian I only pay tax where my money is made - I'm sure Microsoft should pay tax where there money is made too.
  • +1
  • Well if you think about it its their antipiracy fund
  • While Hong Kong is part of China, it's not a "left/commie" country due to its history as a former British colony and currently as a special administrative region with high degree of self governance.  In fact it is often ranked as more free/capitalistic than the US when it comes to tax laws and regulations.  China and Hong Kong are very different politically and economically, which is one of the major reason why the protests are going on right now....
  • But the left does good, the US Democrats are left, as are both the British and Australian Labor Parties (I believe Canadian also) as well as the various Greens parties. Hong Kong is so right wing that oldies are left collecting cardboard on the street and the gap between the rich and the poor is high with social issues like housing unaffordability out of control. Nothing wrong with a little socialism - what you want (and what they want in HK) is the right to have a balance of power as many established democracies have. Don't turn punishing tax evasion into something wrong. If Hong Kong wasn't so free with their tax maybe they could support their poor. The mainland has a way to go, but in Shenzhen welfare is higher per cost of living than Hong Kong, you need a functioning tax system without tax cheats to be able to do that and actually CARE FOR THE PEOPLE (not saying China does that well, but other Western left governments do).
  • I agree in general to what you said, but just want to point out that using Hong Kong as a reference point to what Greater China should be is off to a wrong footing from the beginning. Also I agree tax evasion is bad, but only if the government is fair and just (more or less), neither of which could be said of the communist party (easily self evident with the amount of corruption cases being exposed as of recent, with money being turned out measuring by tonnage...).  So in a way, I think the Chinese prosecuting MS for tax evasion just stinks of everything BUT about upholding the tax law.  Me thinks it's more to do with someone wanting to line their pockets more than anything else....
  • Probably Mircosoft. Not Microsoft but a cheap Chinese rip off ;)
  • Lol. Doubt they did it on purpose.
  • Of course they did it on purpose, they are a multi bullion dollar company with more accountants them I have years on this Earth, either said accountants can't do their jobs properly or this M company was doing something dodgy. Considering they had already admitted to the same thing in the US we can probably safely assume the same occurred in China.
  • Nevermind whether they did or not, makers of software with IP developed abroad to be marketed in China should be exempt. Particularly and especially Microsoft, unless China wants to crack down seriously on piracy in all forms.
  • F*ck the Chinese. There is a reason nobody in the West takes their ass seriously. When they stop pirating and stealing IP, Microsoft will pay taxes. Besides, Microsoft China probably isn't making any profits.
  • So what was Microsoft's excuse over in the US for tax evasion then? Still piracy?
  • Its hader to believe if they didn't... Isn't that the problem with global firms? None are willing to pay their taxes...
  • But most countries are not that like gangster as china.
  • That's right. But then most countries are scared as poopoo to fend of companies by forcing them to obey tax laws. Western countries struggle getting jobs and getting their economy back on track. If you want to be a gangster you'll have to have something that the companies cannot live without. Namely cheap labors. China has that in heaves whereas in a country like mine (Denmark), you wont find any adult that will work for less than 20$/hour plus benifits...
  • Whether or not they did it on purpose mainly depends if you believe anything that China says.
  • Especially when their citizens break copyright law ms is in the right
  • MS has claimed that clearly. For people trying to accuse others before they really know what happened I can only express my despise.
  • Chinese react this way to everything international that sells well and earn a lot from Chinese citizen. *smh*
  • > Tax authorities investigated the "M" company after it had reported losses for six years whereas its peers had profitable business operations. So they're charging Microsoft taxes on it's competitors' profits?    
  • They're saying it would be odd that everyone else in the sector made profits but ms.
  • Yeah, who else had a whole black market dedicated to piracy of their IP. It's easy not to make money when you can't charge for it. This wouldn't be surprising, but it still seems fishy.
  • Um, everybody? There are buttloads of counterfeit iPhones and android phones out there running dodgy software.
  • They investigated because of it, then Microsoft (M) confirmed.
  • It's China, so they don't have to pay...
  • The $140 million may not be so bad but don't they execute executives in china for lesser offences?
  • Ok, China is really sketchy, but I don't think it's that sketchy anymore. At least, I hope not... :o
  • I don't believe it for a second. No company that size would be dumb enough to pull tax evasion like this. This is just China seeing how much they can shove before someone shoves back.
  • Companies that size do it all the time. Amazon does it.
  • Ms, the fruit company and goggling company are all tax evaders. They register offshore accounts, to evade taxes down under. Its coming to an end very soon.
  • But they all do it legally. The things they do are not illegal. They may seem shady or immoral, but most big Fortune 500 companies don't illegally evade taxes. They're so big that every government is watching them, so its pretty hard to get away with illegal evasion.
  • Well you could say by doing so "legally" they are intentionally avoiding tax. Pretty much all of these companies have shell corporations owned by other shells and so on.
  • Whatever. Chump change. Deal with it.
  • My thought exactly.
  • And yet billions are lost due to piracy in China. I think China is still pissed that Microsoft stopped supporting XP.
  • Fine. Let them use XP and all that comes with that. China is working on their own OS so watch out Windows, Yosemite and Chrome. No more iPad knock offs. No more illegal copies of Windows and Office.
  • I would never use software made by the Chinese government. I would rather jump on the Android bandwagon. Posted via the Windows Phone Central App for Android
  • Says the person, who is commenting via the app for android :P.
  • Maybe the government is 140 million over budget on their homegrown OS endeavor...
  • Tax evasion in China is called Inversion in the United States.
  • M forgot a bribe payment to someone
  • Short on funds to make our home grown OS. Lets see which company will help donate. Ah, the M company.
  • The world is going to be a very different place once China usurps the United States and takes over the planet.
  • People are too blind to see. Petro dollars are already moving away from US currency.
  • M&MS?
  • Microsoft was indeed evading taxes, in the sense they weren't making any money to tax.
    Seriously, software piracy is so rampant over there, and the government does NOTHING to stop it.
    That's why Microsoft was posting losses in China: They can't make any money when the vast majority of the population is stealing their stuff. And if they aren't making money, there's no money to tax. Or at least, that's how it's supposed to work, but evidently in China: You're taxed based on how much you're /supposed/ to be making.
  • yupp actually with respext to all American companies Microsoft is one of the companies which china has still maintained good or Okish relationship. maybe even apple. Thats the main reason google is banned in china.
  • Lol I wouldn't pay them a dime. I'd just stop selling any products. Also blacklist any Windows key that's registered in China.
  • Here's what's going on in China: Not just microsoft but lots of American companies got fined recently like mcdonalds, Apple and Qualcomm. Actually microsoft always has a very good relationship with Chinese government. Guess how much is the fine for Qualcomm this year? more than 1 billion dollars.  Years ago there's no concept of buying windows or office in China. Lots of people think Windows comes with PC, and office comes with windows, for free. You can easily download them online. Some websites even designed lots of good looking themes for their version of windows in order to get more downloads because there's a competition there. But today most of those pirate windows and office got removed and some websites even got fined. More Chinese are buying windows and other Microsoft product, so that money is just for protection racket. 
  • Thats chump change for MS. They'll just pay it and keep it movin
  • The price you pay to play in China. I guess this now means the Windows ban is no more?!
    Good times...
  • Can the U.S. do this too? #doubleirish
  • Corruptness
  • The only thing China is good for is keeping N Korea in check.
  • "Actually I think I have 140 million dollars in my pocket change just let me get that out." Said no one, except the super rich
  • Microsoft should charge them back pay for all of the pirated Chinese citizens as well as governmental offices have stolen all these years.
  • Amen
  • Seriously people. A 20 % of the coments in this article are racist.
  • And out of proportion
  • Haha, it's called a protectionism racket. China knows they are a huge internet market but also would rather their homegrown copies succeed rather than American companies. They trump up charges then try to tax the US company out of the country.
  • Wow the racism is strong in this one. does seem pretty sus that a company as big as "M" would make losses while it's competitors reported significant gain. It also seems pretty dodgy to not pay tax on money in the country where you earned the money. The US continue to attempt to exploit countries like China, it's disgusting. It's disgusting how so many people support this business model. People defending this company saying 'but maybe they really didn't make money there' are naive or ignorant. They confirmed the tax evasion. They agreed to pay. Does that sound like the move of a company who make losses consistently?
  • The idea that MS paid simply because the fine was valid is also naive. China has a long history of extorting companies to remain in their market. This isn't racist to say, it is a business reality.
  • What about all the revenue China owes Microsoft for all the illegal copies of Windows Office they use!