I posted this in the other thread on the subject but it's worth repeating here: Apple does not actually have any subsidiaries in the British Virgin Islands (or any other Caribbean island), and (despite common belief) it has not actually moved its intellectual property offshore.
Apple's international tax structure was thoroughly documented when they were called up to testify before the Senate, which you can read about in the Senate Subcommittee Memo on Offshore Profit Shifting and Apple[1], and while they do have several Irish subsidiaries, they do not have any subsidiaries in the Caribbean or move any money into the Caribbean.
This is further reinforced in Apple's testimony before the Senate[2]:
> Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).
Yes, you are right, Apple does not use the Caribbean tax shell company shenanigans most other tech giants using the double Irish do. But why bother, when Ireland gives you the sweetheart deal even BETTER than what the Caribbean tax cheats have on offer...
So replace my BVI sub with that "fairy tale green island of tax cheat's dreams... "
They have a specially negotiated rate with Ireland. (The crux of this issue is whether Ireland granting them a special rate was legal under EU law.)
Edit: Actually, "special rate" is a bit misleading, as it implies Apple went to Ireland and said "hey, we'd only like to pay .05% instead of 12.5%" and Ireland said okay. The way it actually works (as described in the previously mentioned Senate memo) is that ASI (the Irish subsidiary) buys an iPhone from its manufacturer in China at cost for $200, marks it up to $600, and then sells the iPhone to Apple Italy for $600. Apple Italy sells the iPhone to a customer for $600 and recognizes $0 in profit, while ASI records $400 in profit. But ASI claims to not be a tax resident of Ireland and therefore when it buys an iPhone from China and sells it to Italy, that transaction shouldn't be subject to Irish taxes since no economic activity actually occurred in Ireland.
Therefore, the only taxes that ASI pays Ireland are from transactions where they actually sold products in Ireland itself. In 2011 ASI recognized profits of $22 billion, of which $50 million occurred in Ireland, and so they only paid ~$10 million in Irish taxes on that $50 million, leading to an effective tax rate of .05%.
Thanks for the example. It clarifies things. I can see how the EC claimed that Ireland was giving Apple 'state aid' although it looks like any company doing this would also be subject to a ruling like this.
Apple's international tax structure was thoroughly documented when they were called up to testify before the Senate, which you can read about in the Senate Subcommittee Memo on Offshore Profit Shifting and Apple[1], and while they do have several Irish subsidiaries, they do not have any subsidiaries in the Caribbean or move any money into the Caribbean.
This is further reinforced in Apple's testimony before the Senate[2]:
> Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).
[1] http://www.hsgac.senate.gov/download/?id=CDE3652B-DA4E-4EE1-...
[2] https://www.apple.com/pr/pdf/Apple_Testimony_to_PSI.pdf