WASHINGTON: Using an unusual global tax structure, Apple Inc has kept billions of dollars in profits in Irish subsidiaries to pay little or no taxes to any government, a US Senate report on the company's offshore tax structure said.
In a 40-page memorandum, the Senate's Permanent Subcommittee on Investigations identified three subsidiaries that have no “tax residency” in Ireland, where they are incorporated, or in the United States, where company executives manage those companies.
The main subsidiary, a holding company that includes Apple's retail stores throughout Europe, has not paid any corporate income tax in the last five years.
The subsidiary, which has a Cork, Ireland, mailing address, received US$29.9bil in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30% of Apple's total worldwide net profits, the report said.
“Apple has exploited a difference between Irish and US tax residency rules,” the report said.
Apple said in a comment posted online yesterday that it did not use “tax gimmicks”.
It said the existence of its subsidiary “Apple Operations International” in Ireland did not reduce Apple's US tax liability and that the company would pay more than US$7bil in US taxes in fiscal 2013.
Subcommittee staffers said yesterday that Apple was not breaking any laws and had cooperated fully with the investigation.
Corporations must pay the top US 35% corporate tax on foreign profits, but not until those profits are brought into the United States from abroad.
This exception is known as corporate offshore income deferral.
Large US companies boosted their offshore earnings by 15% last year to a record US$1.9 trillion, avoiding hefty tax bills by keeping the profits abroad, according to research firm Audit Analytics. - Reuters
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