The US Internal Revenue Service (IRS) has filed a lawsuit against Facebook in a San Francisco court accusing the tech giant of evading $9B in taxes, Reuters reports.
According to the IRS, Facebook allegedly transferred a part of its profits to Ireland to avoid paying taxes in the US. In particular, the agency claims the firm understated the price of the intellectual property it sold to its Irish subsidiary back in 2010. As a result, Facebook paid a 12.5% in corporate taxes in Ireland, while this percentage grows to 35% in the US.
Facebook says that this low valuation reflects the risks associated with the company's international expansion before it went public. In 2010, the company "had no mobile advertising revenue, its international business was nascent and its digital advertising products were unproven," said a representative of the social network.
Facebook affiliates pay royalties to its parent company for accessing its trademark, users and technologies. Between 2010 and 2016, Facebook Ireland paid Facebook USA over $14B in royalties and cost-sharing payments.
If the court approves the IRS' claim, Facebook will have to pay $9B plus interests as well as a fine. Facebook believes the trial will last 3-4 weeks.
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