Microsoft owes around 29 billion dollars in back taxes, according to IRS

The Internal Revenue Service (IRS) has said Microsoft owes the US Treasury 28.9 billion US dollars (£23.5 billion) in back taxes, plus penalties and interest, the company revealed in a securities filing.

The figure, which Microsoft disputes, stems from a long-running IRS probe into how Microsoft allocated its profits among countries and jurisdictions in the years 2004 to 2013.

Critics of that practice, known as transfer pricing, argue that companies frequently use it to minimise their tax burden by reporting lower profits in high-tax countries and higher profits in lower-tax jurisdictions.

Microsoft, which is based in Redmond, Washington, said it followed IRS rules and will appeal against the decision within the agency, a process expected to take several years.

The company’s shares dropped slightly in aftermarket trading, falling 331 dollars.