A day after Facebook reported 63 percent rise in June quarter advertisement revenues to $6.24 billion, the Menlo Park-based social media company said last Thursday that it was served a notice by the U.S. revenue authorities with a tax bill of about $5 billion for undervaluing assets while transferring them to an Irish subsidiary in 2010.
The U.S. Internal Revenue Service's (IRS) notice was served about a week ago to the company, Facebook said in a regulatory filing.
"While the notice applies only to the 2010 tax year, the IRS states that it will also apply its position for tax years subsequent to 2010, which, if the IRS prevails in its position, could result in an additional federal tax liability of an estimated aggregate amount of approximately $3.0 billion to $5.0 billion, plus interest and any penalties asserted," the filing said, reports AFP.
"We do not agree with the position of the IRS and will file a petition in the United States Tax Court challenging the notice," the company added.
Reuters had reported early last month that the IRS filed a lawsuit in a San Francisco federal court in the context of the company reporting royalty income from transfer of some of its intangible property to Facebook Ireland Holdings Unlimited.
Facebook has been bracketed with other global tech companies such as Google, Amazon and Apple who have taken advantage of lower and lenient tax rates prevailing in Ireland, Belgium and Luzembourg, prompting European Union officials to examine at the tax obligations of these companies, AFP added.
Facebook earned a net income of $2.05 billion for the June quarter, as against $715 million in the corresponding quarter last year.
The company had 1.13 billion daily active users as on June 30, 2016 and 84.5 percent of them are from outside the U.S. and Canada.
Founded in 20014 by Mark Zuckerberg, who is also the chairman and CEO of the company, Facebook had 14,495 employees as of June 30, 2016.
