As one of the most famous companies in the world, Apple has a lot of "fruit powder" in the world, which has created a lot of profits for Apple. This also makes Apple one of the most valuable companies in the world. But earning more and spending less has become the knowledge of all enterprises, and Apple is no exception. For a company like Apple, the annual tax payment is extremely huge. But in fact, Apple has the most offshore funds of American companies. If Apple brings all its offshore funds back to the United States, it will have to pay at least $59.2 billion in taxes. Apple, on the other hand, evaded this huge expenditure in a reasonable way.
The IRS is famous for its ability to collect taxes. If Apple can avoid paying such a large tax, there must be no loopholes to catch. This point needs to be discussed from the American tax law. The highest corporate income tax in the United States is 35%, which ranks among the top in the world. Moreover, according to American tax law, resident enterprises must pay taxes on their income from all over the world. However, there are some exceptions. As long as overseas profits are reinvested and have not returned to China, enterprises are allowed to temporarily not pay taxes on these profits. Apple, on the other hand, uses this clause to avoid taxes reasonably.
1. Effectively divide business income.
That is, Apple products are purchased from third-party manufacturers (mainly Foxconn) at low prices and then sold to Apple retail stores or distributors at regional prices. In this way, Apple's international sales have gained global sales revenue outside the Americas.
2. The income will eventually enter the tax-free zone.
Perhaps some readers have noticed that "Apple International Sales" and "Apple International Operation" are not the same company. How is Ireland tax-free? It is necessary to introduce a key company "Apple Europe Operation" here. According to the regulations that business transactions between EU member states are exempt from income tax, Apple registered its "Apple Europe Operation" in the Netherlands. Unlike Ireland, Dutch tax law determines the nationality of a company through its place of registration rather than its headquarters. So "Apple Europe Operation" became a Dutch company, not an Irish company. Thirdly, enterprise transactions between EU member states are exempt from income tax, and the income of Apple Sales Company is handed over to Apple Europe Operation and Apple International Operation, so that all the income of Apple except the United States is transferred tax-free in EU member states. And "Apple International Operation" is defined as a foreign company by the Irish Taxation Bureau, so "Apple International Operation" does not need to pay a dime tax when remitting income to BVI Apple Headquarters.
But the pure capital flow is obviously illegal (because there is no "transaction" between the three European companies), and here, Apple has adopted extremely ingenious means, "intellectual property" as the medium. "Apple International Sales" pays the royalties to "Apple International Operation" and designates "Apple European Operation" to collect them. After receiving the patent fee, "Apple Europe Operation" will transfer it to "Apple International Operation" in the name of patent royalties, and "Apple International Operation" can transfer the income to Apple BVI headquarters without blowing off dust.
In order to avoid the stipulation that "resident enterprises must pay taxes on their income from all over the world" in the US tax law, Apple uses the intangible asset of "intellectual property" because American law stipulates that "overseas subsidiaries of American companies can keep the income obtained through non-American intangible assets without paying taxes before the overseas subsidiaries transfer their profits back to the United States". Therefore, Apple does not have to pay taxes to the United States on this profit. It is worth noting that Irish and Dutch companies are not the only tax avoidance channels for Apple. Apple also uses subsidiaries such as Luxembourg and Switzerland to avoid taxes.
3. Is this scale of capital flow legal?
For such tax avoidance, the US government is not doing nothing. The US Senate held a hearing to discuss Apple's tax avoidance in Ireland. However, after careful investigation, the US Securities and Exchange Commission concluded that there was no problem with Apple's financial situation.
At this point, the question of whether Apple's tax avoidance behavior is legal has come to an end. In a reasonable and legal way, Apple adopted an offshore corporate structure and successfully avoided taxes of nearly $60 billion.
It can be seen that the establishment of offshore company structure is by no means simple as expected, and it is necessary to understand the legal provisions of the place where offshore companies are registered and the place where operating companies are registered in order to design reasonable and legal tax avoidance methods.
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