Apple moves $9B worth of iTunes intellectual property to Ireland

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in General Discussion
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.
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Comments

  • Reply 1 of 31
    eightzeroeightzero Posts: 2,691member
    Ummmmm...how do you "move" an intangible asset? Or did we move servers and hard drives?
  • Reply 2 of 31
    iPaddy goes to Holyhill..
    williamlondonentropys
  • Reply 3 of 31
    irelandireland Posts: 17,783member
    How do you move that amount of data?
  • Reply 4 of 31
    gatorguygatorguy Posts: 23,380member
    ireland said:
    How do you move that amount of data?
    Its simply a paperwork shuffle. IP ownership can be transferred (in name only) wherever they find it most advantageous. For now that place is Ireland. 

    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
    edited October 2016 frankie
  • Reply 5 of 31
    fracfrac Posts: 480member
    Even less chance of the Eire govt and people not backing Apple all the way - and I'm not suggesting that Apple is buying favour. 
    Deeds not words. 
  • Reply 6 of 31
    fracfrac Posts: 480member
    ireland said:
    How do you move that amount of data?
    You don't. You move the IP registration address. Maybe a stack of document files at the most. 
  • Reply 7 of 31
    Probably because Luxembourg recently got hit by the EU tax hammer. Ireland really should "Irexit". They'd maintain their good standing with many large businesses located there. The whole of Ireland should be purchased by a consortium of these businesses.
    entropysmonstrosity
  • Reply 8 of 31
    gwydiongwydion Posts: 1,083member
    Probably because Luxembourg recently got hit by the EU tax hammer. Ireland really should "Irexit". They'd maintain their good standing with many large businesses located there. The whole of Ireland should be purchased by a consortium of these businesses.
    I suppose that those thing are only written to "Épater le bourgeois".
    edited October 2016
  • Reply 9 of 31
    plovellplovell Posts: 819member
    gatorguy said:
    ireland said:
    How do you move that amount of data?
    Its simply a paperwork shuffle. IP ownership can be transferred (in name only) wherever they find it most advantageous. For now that place is Ireland. 

    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
    Unlikely to apply here. This is a foreign-to-foreign transfer and the IRS is interested in U.S.-related transfers. The EU is taxing it though "The shift is expected to net Ireland tens of millions of euro in value-added taxes."
    jony0
  • Reply 10 of 31
    sricesrice Posts: 120member
    AAPL corporate tax rate is usually between 25%-26%. It's in their 10K every year. I wish there was better education on this topic -- Apple is not tax aggressive.

    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. 
    edited October 2016 Solinolamacguy[Deleted User]jony0
  • Reply 11 of 31
    Probably because Luxembourg recently got hit by the EU tax hammer. Ireland really should "Irexit". They'd maintain their good standing with many large businesses located there. The whole of Ireland should be purchased by a consortium of these businesses.
    I'm not sure that would work out.

    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.
  • Reply 12 of 31
    volcanvolcan Posts: 1,799member
    Perhaps "move" is not the right word. They likely have an iTunes subsidiary which purchases the IP from Apple at a discount. Then Apple businesses in other countries license it back at a high rate, hence creating large tax write-offs in those other countries. 
  • Reply 13 of 31
    eightzeroeightzero Posts: 2,691member
    frac said:
    ireland said:
    How do you move that amount of data?
    You don't. You move the IP registration address. Maybe a stack of document files at the most. 
    I still don't get it. I assume we are mostly discussing copyrights, I presume then there is a EU version of the Library of Congress where the ownership is claimed? Isn't that an import?
    cali
  • Reply 14 of 31
    MacProMacPro Posts: 19,483member
    Tim O'Cook ;)
    williamlondonSpamSandwich[Deleted User]
  • Reply 15 of 31
    gatorguygatorguy Posts: 23,380member
    srice said:
    AAPL corporate tax rate is usually between 25%-26%. It's in their 10K every year. I wish there was better education on this topic -- Apple is not tax aggressive.

    Is Apple deferring tax payments to the US? Yes, but is accruing that money and will pay the taxes when the money is repatriated.... Either way, it doesn't really impact Apple that much because they've accrued (set aside) the money to pay the taxes ..
    No, Apple hasn't set aside (accrued) deferred taxes on upwards of $100B in "overseas" cash holdings. If they were to bring bring it all home to the US they would have around $30B additional due in currently unrecognized corporate tax obligations. And yes that's according to Apple themselves.
    edited October 2016
  • Reply 16 of 31
    sricesrice Posts: 120member
    gatorguy said:
    srice said:
    AAPL corporate tax rate is usually between 25%-26%. It's in their 10K every year. I wish there was better education on this topic -- Apple is not tax aggressive.

    Is Apple deferring tax payments to the US? Yes, but is accruing that money and will pay the taxes when the money is repatriated.... Either way, it doesn't really impact Apple that much because they've accrued (set aside) the money to pay the taxes ..
    No, Apple hasn't set aside (accrued) deferred taxes on upwards of $100B in "overseas" cash holdings. If they were to bring bring it all home to the US they would have around $30B additional due in currently unrecognized corporate tax obligations. And yes that's according to Apple themselves.
    I think we are agreeing.

    Provision for Income Taxes 

    Provision for income taxes and effective tax rates for 2015, 2014 and 2013 are as follows (dollars in millions): 

     

       2015   2014   2013 

    Provision for income taxes

      $19,121    $13,973    $13,118  

    Effective tax rate

       26.4%     26.1%     26.2%
    Net Income: 53,394    $39,510    $37,037

    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.
    edited October 2016 Solinolamacguyurahara
  • Reply 17 of 31
    gwydiongwydion Posts: 1,083member
    srice said:
    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.

    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
  • Reply 18 of 31
    gwydiongwydion Posts: 1,083member
    srice said:
    gatorguy said:
    srice said:
    AAPL corporate tax rate is usually between 25%-26%. It's in their 10K every year. I wish there was better education on this topic -- Apple is not tax aggressive.

    Is Apple deferring tax payments to the US? Yes, but is accruing that money and will pay the taxes when the money is repatriated.... Either way, it doesn't really impact Apple that much because they've accrued (set aside) the money to pay the taxes ..
    No, Apple hasn't set aside (accrued) deferred taxes on upwards of $100B in "overseas" cash holdings. If they were to bring bring it all home to the US they would have around $30B additional due in currently unrecognized corporate tax obligations. And yes that's according to Apple themselves.
    I think we are agreeing.

    Provision for Income Taxes 

    Provision for income taxes and effective tax rates for 2015, 2014 and 2013 are as follows (dollars in millions): 

     

       2015   2014   2013 

    Provision for income taxes

      $19,121    $13,973    $13,118  

    Effective tax rate

       26.4%     26.1%     26.2%

    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
  • Reply 19 of 31
    sricesrice Posts: 120member
    gwydion said:
    srice said:
    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.

    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
    I dont understand..
  • Reply 20 of 31
    wigginwiggin Posts: 2,265member
    srice said:
    AAPL corporate tax rate is usually between 25%-26%. It's in their 10K every year. I wish there was better education on this topic -- Apple is not tax aggressive.
    But that tax rate is applied to the profit, and profit can be lowered by deducting expenses, including the cost of licensing your own IP from your own foreign company. I'm pretty sure that iTunes wasn't invented in Luxembourg. How did $9 billion of intellectual property end up there in the first place?

    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.
    frankie
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