Apple’s tax tactics in Ireland have landed the company in Congress’ hot seat this year, but another European nation has also helped Apple wiggle its way out of paying massive taxes on its iTunes revenues.
Apple reportedly took advantage of Luxembourg’s complex and corporation-friendly taxation system to get out of paying taxes on its iTunes revenue in Europe. The country has a 29% corporate tax rate, but after negotiating a deal, Apple paid only $25 million in taxes out of the $2.05 billion in iTunes revenue. Apple’s not the only American company exploiting Luxembourg’s tax laws either, with some companies paying less than 1% of revenue.
Here’s how Apple avoids paying nearly all taxes in Europe:
Luxembourg served as one of Apple’s overseas tax havens from September 2008 until December of last year, giving the company a 1.2% corporate tax rate. Over two-thirds of Apple’s European revenue from iTunes was routed through its Luxembourg holding company called iTunes Sarl. Apple has since moved the holding company to Ireland where it pays less than one percent tax on iPhone and iPad sales.
Astonishingly, Apple’s tax bill is not even the lowest among Luxembourg-incorporated companies, as Amazon and others enjoy a much lower rate. Now everyone’s moving their money over to Ireland to cash in before their loophole closes.
EU regulators issued a preliminary conclusion in September that Apple received illegal state support from Ireland. Apple responded by claiming it never received preferential treatment by Irish officials, but the country announced recently that it plans to close its Double Irish loophole that has become the vogue on Wall Street for getting out of high tax bills.
Irish officials have vowed to close the ‘Double Irish’ loophole, but Ireland has given Apple a six-year grandfathering close that will allow the company to keep its annual earnings practically tax free until 2020.
Source: AFR
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
18 responses to “How Apple avoids paying taxes on iTunes revenue”
This is a seriously old subject. Apple is one of dozens if not hundreds of US corporations pulling this crap. A few years ago GE, with $8B in profit, used exploits to get a tax refund. Do some research, the whole situation reeks.
“Ireland has given Apple a six-year grandfathering close”
“Close” or “clause?”
Spot on. It definitely Reeks. Countries are going to cut them off soon.
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Gosh, maybe if taxes weren’t so F’ing high here in the US they wouldn’t have to go through all of these other countries to keep the revenue their products generated. These stories are published in general to make people think “Bad Apple, how dare they do that.” But in fact the correct opinion that it often creates is “Crap, I wish I could do that too.”
Just think that the small business companies and the tax payers are the ones that really contribute for the welfare of the countries. This is not right. Fiscal equality is what the european union talks from the mouth out, but then we see that some countries don’t play by the same rules as the rest of us. These companies like Apple should be ashamed . The big problem is that everyone knows about this and the governments don’t do anything about it because they “eat at the same table”.
“Tax tactics?” What are you talking about? Every company (and individual) tries to pay what is required by the law, and not more. Gee, blame big bad Apple for doing what its shareholders would expect. So these “tactics” are nothing more than making the optimal choice for your shareholders. That said, Apple still pays more U.S. taxes than any other company.
“So these “tactics” are nothing more than making the optimal choice for your shareholders.” You mean all that cash on hand that Carl Icahn wants http://wp.me/p19WFc-zDw.
The patriotic choice for the shareholder would be for a company to pay their fair share of taxes in the countries which provided them the opportunity to make those profits and by doing so contribute to the welfare of those citizens which consume their goods.
They are required by law to pay 29% and they found a vaguely legal loophole which allows them to funnel profits though a shill corporation in tax lenient countries to avoid paying their fair share.
Those loopholes are being closed because anyone can see that its a shady practice. Just because its not against the law, that doesn’t make it right even for the sake of profits.
According to what you’re saying they’d have to pay their fair share of taxes to countries all over the world (especially China). Shady practice or not, it is hard to blame them and other companies that do it. 29% of a company’s profits are a lot larger than it sounds.
Yeah, tell me about it. I feel it every week.
And people like Icahn would sue them for not taking advantage of these “LEGAL” loop holes and our legal system would find them guilty of this. Damned if you DO and if you Don’t.
Who gives a shit about patrioism when it comes to Billions of USD that some government wants to legally rob from a coproation? 29% is unpatriotic to the very core and as a matter of fact it’s purely immoral. Patriotism is not the moral high-ground my friend in the business world. The loophole was not created by a government for Apple… it was created for some cronies in an entirely different “business” (if you want to call it that) to jump through before someone found that Apple and others were socially speaking,”making too much money”. Your reasoning is seriously flawed because you seem to be mixing legality with righteousness…the two don’t mix in law.
What can I say? This mofo, the writer, just couldn’t shut his mouth. Haters gonna hate.
Because to him, Apple must be hated at all cost.
Yea, let’s praise the big corporate entities from being able to avoid paying millions in taxes because they can. Let’s idolize these big businesses who can afford taxation while the white collored man works his ass off and is forced to give a large portion of his salary to taxation because he or she does not have the capital nor the team of lawyers to find the loop holes.
It’s disgusting. We here in America can demonize those on welfare who cheat the system, and get all there bills paid all the whole giving a free pass to Apple and other large companies from paying their fair share of taxes.
No matter how to justify it, it’s disgusting and should be against the law. Funny how these Apple fanboys will refuse to do business with the companies not accepting Apple pay, but will still line up in droves to buy their products while Apple avoids proper taxation.
Hypocrites all.
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Apple does pay income tax. More than any other US corporation.
Apple Paid $6 Billion in Federal Income Tax in 2012, 1/40 of All U.S. Corporate Income Tax Collected.
http://www.macrumors.com/2013/01/04/apple-paid-6-billion-in-federal-income-tax-in-2012-140-of-all-u-s-corporate-income-tax-collected/
Companies pay taxes on income not revenues..
Crap? Avoiding taxes isn’t crap. Taxes are crap. Taxes are too high everywhere, even moreso than in the US. Taxes are what regimes use to stay in power, by sucking the hard-earned money from its citizens. Taxes are used to give money to people who don’t deserve it, who refuse to work, etc. I say to hell with 99% of all taxes. National-level taxes should exist to fund the military and related organizations (FBI, border patrol), and local-level taxes should exist to fund local services such as the fire department. Beyond that, it’s theft and waste.