Microsoft’s Bermuda subsidiaries under investigation over tax matters

Rebecca Zuill and Owain Johnston-Barnes

Updated: Feb 04, 2014 07:01 AM

Microsoft: Bermuda subsidiaries are being probed by a foreign country

The Huffington Post is reporting that three Bermuda subsidiaries of Microsoft Corp are involved in a tax inquiry launched by “another country”, according to documents made public by the Bermuda Supreme Court.

But it adds that once the inquiry was first reported by the online newsletter OffShoreAlert the cases were removed from the public record.

The writs filed suggest the information was being requested from overseas under a tax information exchange agreement (TIEA). Bermuda has signed such agreements with 38 countries, according to the Organisation for Economic Cooperation and Development (OECD).

The Huffington Post says in its story: “The look into the three shell companies, the existence of which Microsoft does not acknowledge in public filings with regulators, comes as the technology giant is under pressure for its low tax bills. Two of the previously undisclosed companies are affiliated with Microsoft’s Irish subsidiaries that were alleged eight years ago to have helped the company shave its tax bill.”

The Huffington Post credited OffShoreAlert — “a newsletter widely read by those interested in the Caribbean business of tax avoidance and evasion” — with discovering the existence of the inquiry. It continued: “After the inquiry was mentioned earlier this month in the newsletter, the cases were removed from the public record.”

“They’re not available,” Peter Miller, assistant registrar at the Bermuda Supreme Court, told The Huffington Post. “Rescinding orders were made with respect to the TIEAs. ... Orders of the court were made to seal them.’

“The Bermuda filings do not reveal which country originated the inquiry.”

The original writs read:

In the matter of an application for a production order under the International Cooperation (Tax Information Agreements) Act 2005, between: In the matter of the Minister of Finance vs Flat Island Company. January 14, In Person.

The Royal Gazette also found that these writs along with others had been removed from the Writ Book, which is held at the Supreme Court of Bermuda.

The other writs are:

In the matter of an application for a production order under the International Cooperation (Tax Information Exchange Agreements) Act 2005, between: In the matter of the Minister of Finance VS (1) ADG Absolute Diversified Growth Fund Ltd 2) TJ Pearman Building. January 6, In Person.

In the matter of an application for a production order under the International Cooperation (Tax Information Agreements) Act 2005. January 14, In Person.

The Huffington Post also reported that during the summer, the OECD started to look into the tax strategies of global technology giants, with emphasis on transfer pricing — “shuffling profits into countries that have little or no tax obligations”.

The Huffington Post added: “Microsoft has saved billions in US tax payments by moving money offshore, according to a high-profile investigation by the Senate’s Permanent Subcommittee on Investigations. Last year, it was able to use its overseas cash to purchase Nokia, a deal that would have been more difficult had it not amassed such an outsize pool.”

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Microsoft’s Bermuda subsidiaries under investigation over tax matters