Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

More European Woes for Microsoft Corporation (MSFT)

The Danish government says Microsoft Corporation (NASDAQ:MSFT) owes it $1 billion in back taxes and interest, the largest such penalty in Denmark’s history, according to Danish news source DR2 (translation here).

The Skatteministeriet, Denmark’s Ministry of Taxation, is currently negotiating with Microsoft and the U.S. government to have that money returned to Denmark, says DR2.

Microsoft Corporation (NASDAQ:MSFT)’s alleged underpayment stems from its purchase of Danish financial software company Navision in 2002 for $1.9 billion. After renaming it “Microsoft Business Solutions,” Microsoft then sold the rights to the Navision software to its Irish subsidiary.

Microsoft Corporation (NASDAQ:MSFT)That sale, Denmark says, was made so Microsoft could reap the benefits of Ireland’s lower tax rates from sales of what the Danes contend is a Danish product. Navision continues to be developed in Denmark within Microsoft’s Danish division, an entity with 600 employees.

Even though the Navision software, now called Dynamics NAV, has sales of around $2 billion a year, any earnings go to Microsoft Corporation (NASDAQ:MSFT)’s Irish company, not to its Danish division. Hence, Denmark sees no tax revenue from it.

And Microsoft will have to face more financial penalties, according Reuters, which last week reported European Commission plans to fine the company before the end of March.

Reuters spoke to three people close to the matter who said the penalty would be tied to a Microsoft antitrust case more than 10 years old. That case was supposed to have been settled in 2009 after Microsoft Corporation (NASDAQ:MSFT) promised to give European buyers of its Windows operating system a choice of browsers that rival its Internet Explorer.

Microsoft made that pledge to avoid a EU penalty that could have gone as high as 10% of its worldwide sales.

We’re No. 3
Since 2008, Internet Explorer has fallen from a 48% share of the European browser market to 24%. Google Inc (NASDAQ:GOOG)‘s Chrome has 35%,Firefox has 29%, Apple Inc. (NASDAQ:AAPL)‘s Safari has 9%, and Opera has 2%, according to StatCounter, an Internet traffic analysis company.

Microsoft Corporation (NASDAQ:MSFT) has already been fined $2.1 billion by the European Commission for other offenses, including designing its media player to only work on Windows. The browser offense occurred between February 2011 and July 2012, according to Reuters. Microsoft blamed it on a technical error.

If Denmark prevails in its tax case, according to DR2, it would use the windfall tax revenue to either build a new hospital, a new highway, or hire 15,000 more primary school teachers.

The article More European Woes for Microsoft originally appeared on and is written by Dan Radovsky.

Fool contributor Dan Radovsky has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.