In a regulatory filing on April 17, 2006, Symantec Corporation (Symantec) reported that it has received an approximate $1 billion tax bill from the United States Internal Revenue Service (IRS) in connection with a transfer pricing structure involving its Irish subsidiary.
This type of tax planning technique is popular with information technology companies. It involves the shifting of income from a United States parent company to an offshore affiliate in a lower tax jurisdiction such as Ireland. Technology companies usually do this by licensing their intellectual property to their offshore affiliate at a reduced royalty, thereby shifting income to the affiliate.
The IRS claims that Symantec under-priced intellectual property licenses to its subsidiary. Symantec does not agree with the IRS position and plans to contest the claims. Any additional taxes in excess of the provision for the matter would be reported as an expense in the period that payment is probable.
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