Apple moves $9B worth of iTunes intellectual property to Ireland
Apple continues to expand its operations in Ireland, despite ongoing criticism of its presence there for tax purposes, with the company's international iTunes business now setting up shop in the town of Holyhill.
In all, some $9 billion in assets have been moved from Luxenbourg to Ireland, according to The Business Post. The shift is expected to net Ireland tens of millions of euro in value-added taxes.
Apple's plans to relocate were first revealed last month, when the company revealed that its iTunes business and content stores for more than 100 countries will be managed at the campus in Holyhill. Previously, Apple's online businesses had been managed in Luxembourg since 2004.
Apple employs nearly 6,000 people in Ireland. The company's operations there have come under intense scrutiny in recent years, with critics contending the nation's laws act as a tax haven for the iPhone maker.
The European Commission recently concluded that Irish tax deals with Apple constituted illegal state aid, and ordered the country to collect $14.5 billion in back taxes from the Cupertino, Calif., company. Both Apple and the Irish government are planning to appeal the decision, the latter because it's worried about losing appeal with foreign businesses. Apple has already made commitments to stay in the country.
Although the Irish government has since moved to close some loopholes, for many years Apple was able to funnel billions in international revenue and pay minimal taxes. In 2014, the iPhone maker paid just 0.005 percent on its European profits, a minute fraction of Ireland's standard corporate tax rate.
In all, some $9 billion in assets have been moved from Luxenbourg to Ireland, according to The Business Post. The shift is expected to net Ireland tens of millions of euro in value-added taxes.
Apple's plans to relocate were first revealed last month, when the company revealed that its iTunes business and content stores for more than 100 countries will be managed at the campus in Holyhill. Previously, Apple's online businesses had been managed in Luxembourg since 2004.
Apple employs nearly 6,000 people in Ireland. The company's operations there have come under intense scrutiny in recent years, with critics contending the nation's laws act as a tax haven for the iPhone maker.
The European Commission recently concluded that Irish tax deals with Apple constituted illegal state aid, and ordered the country to collect $14.5 billion in back taxes from the Cupertino, Calif., company. Both Apple and the Irish government are planning to appeal the decision, the latter because it's worried about losing appeal with foreign businesses. Apple has already made commitments to stay in the country.
Although the Irish government has since moved to close some loopholes, for many years Apple was able to funnel billions in international revenue and pay minimal taxes. In 2014, the iPhone maker paid just 0.005 percent on its European profits, a minute fraction of Ireland's standard corporate tax rate.
Comments
BUT...
with that said the IRS is coming after Facebook for undervaluing IP they've transferred under similar circumstances. Facebook is of course fighting it as they might be nailed for $B's in back taxes if the IRS is successful, and that might lead to Apple, Google, Microsoft and hundreds of other companies paying Uncle Sam for IP transfers too.
https://www.bloomberg.com/news/articles/2016-07-28/facebook-gets-3-5-billion-irs-tax-notice-over-ireland-move
Deeds not words.
Is Apple deferring tax payments to the US? Yes, but is accruing that money and will pay the taxes when the money is repatriated. This is legal and above board.
If Apple has to pay more taxes to EU, they will pay less taxes to US -- but they will still end up paying about 25%-26% taxes.
This is a huge problem for the US Treasury, because if this EC decision sticks - there's over $1T of taxes the EC could claw back and start collecting that will no longer be sent to the US Treasury from all the US companies which do business in the EU - not just Apple.
Either way, it doesn't really impact Apple that much because they've accrued (set aside) the money to pay the taxes .. they'll eventually pay 25%-26% taxes to EC/US.
Are they not repatriating money back to the US to try and get a better tax deal with a tax holiday? Sure.. maybe they'll cut a deal to only pay 20% taxes. That's legal and above board.
A lot of those companies have their European Headquarters in Ireland because it's part of the EU as well as for the Tax benefits.
Ireland out of the EU would mean they would have to pay taxes somewhere else in the EU.
Provision for Income Taxes
Provision for income taxes and effective tax rates for 2015, 2014 and 2013 are as follows (dollars in millions):
Provision for income taxes
Effective tax rate
Taking 2015 as an example: EBITDA = $84.5B, EBT=$72.2B, less $19.1B taxes = net income $39.5B. If they are incurring 26.4% in taxes, they are in no way, no how, tax aggressive. Now it's just countries fighting over who gets how much.. the transfer pricers and lawyer squabble over who gets what share.
This is not true, the EU ruling explicitly states that USA can ask a part of those 13 billion if they are taxes owed to USA
Those provisions doesn't take into account the whole foreign earnings, the 2014 figure is just 1.5 billion for earnings of 33.6 billion
I'm not saying Apple undervalued that IP when it was transferred out of the US as Facebook is being investigated for; but you can't just look the tax rate without also looking at the number (profit) that the rate is being applied to. If you deduct the cost of the US-based R&D to create the IP, and then transfer that IP out of the country and pay to license that IP and deduct it as a business expense to lower your US profits, you've lowered your taxes without lowering tax rate.