US tax authorities investigate Facebook’s asset transfers to Ireland

It suspects that they may have been undervalued by EY

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A woman uses her phone at the Facebook stand during the Web Summit in Dublin in 2015 | Image: Niall Carson / PA Archive/Press Association Images

The US tax authority, the Internal Revenue Service (IRS) is seeking information from Facebook about the transfer of global assets to its subsidiary in Dublin six years ago, alleging the company’s accountants may have undervalued the assets significantly.

The assets concerned are non-physical intellectual property assets including its database of Facebook users outside the US and Canada and the access it provides to its online platform for advertisers and developers.

The global audit firm, EY, valued the assets at the time of the transfer but the IRS’s preliminary evaluation alleges that the valuations "were understated by billions of dollars."

US investigators fear that the approaches used by EY may have been "problematic."

Facebook says it complies with all legal and tax requirements in the countries where it operates.

US authorities face a race against time as the statute of limitations for this case expires at the end of this month.

The IRS has asked Facebook to extend it - but the agency alleges that the tech firm would only agree to do so under "unacceptable conditions."

It told a San Francisco court yesterday that the company has failed to comply with previous summonses and asked the court to force it to do so.

"Facebook failed to comply and did not produce the books, records, papers and other data demanded in the summonses," the IRS said.