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EXCLUSIVE:Tax Office Stings PC Vendors Millions Over Sale Of Windows OS

EXCLUSIVE:Tax Office Stings PC Vendors Millions Over Sale Of Windows OS

ChannelNews has been told that Companies investigated by the ATO over allegations that they did not declare revenue from the sale of a Windows operating system license include Hewlett Packard, Lenovo who last year had to pay Australian Federal Government $3M for misleading consumers, Toshiba, Dell, ASUS, and Acer along with several other smaller PC companies who import PC’s with the Windows OS already bundled into a PC prior to it going on sale in Australia. 

ChannelNews has confirmed that Acer has already paid the ATO $15.7 Million dollars for what is described as a “Royalty Withholding Tax”, one insider told ChannelNews that the ATO could reap as close as $75 Million dollars from the sale of Windows operating system licenses in Australia. 

18 months ago ATO investigators started approaching PC vendors claiming that revenue from the sale of the Windows OS on notebooks and PC’s had in their opinion not been declared in Australia. Vendors at the time claimed that they did not have an obligation to pay the tax attributed to the value of a Windows operating system license. 

ATO investigators told vendors that despite the Windows OS being loaded overseas when a PC was manufactured the vendors had an obligation to pay tax on the revenue generated from the sale of the OS in Australia. 

Some vendors including Acer sought legal advice and after getting that legal advice several vendors “reluctantly” chose to pay the back tax. 

The current OEM System Builder License structure allows system builders to distribute Windows desktop operating system licenses preinstalled on a new PC. Once the seal on that Windows OS is broken a fee of 10% of the value of the PC is payable to Microsoft. 

Darren Simmons who took over as the new CEO of Acer earlier this year said “We were one of several PC vendors investigated by the ATO relating to the withholding of taxes relating to the sale of Windows OS software loaded onto new machines. We will declare this year that we have paid the ATO $15.7 Million”.

The investigation of Acer took place while Charles Chung the recently sacked CEO of Acer Australia was running the Company.

ChannelNews understands that the ATO has already collected over $25M in back royalties from PC vendors and that several PC vendors will be forced to declare the payment in their ASIC filings.  

Several PC vendors contacted by ChannelNews have refused to comment, none of the vendors that we approached said that they were not being investigated.