Apple Reaches Deal With France to Pay Estimated $571M in Back-Taxes

MoreRumors?

macrumors 6502a
Feb 28, 2018
826
616
Tim: Good morning President Macron and how are you doing?
Macron: Good morning Mr. Cook, I am doing well and how are you doing?
Tim: I am well too. President Macron, can you overlook the tax Apple is suppose to owe France?
Macron: Je ne comprends pas l'anglais l'anglais peux tu parler en francais?
Tim: (I can see he is not going to overlook this, s**t!) Ok, Apple will pay taxes owed. How much do we owe?
Macron staff: Passes tax bill to Tim.
Tim: (Hmm, wow that is a lot of money we owe.) Uh, ok. Fortunately we have large cash on hand. Ok, Apple will pay the taxes owed.
Macron: Thank you Tim, now you're speaking my language!
Tim: Oh, uh, you're welcome. For the future, can you give Apple a big tax break and maybe we can pay like $50k a year?
Macron: Je ne comprends pas l'anglais peux tu parler en francais?
Macron staff: Mr. Cook, thank you for making the trip to France and enjoy the sightseeing around Paris.
Macron shakes Tim's hand and walks out quickly.
 

neuropsychguy

macrumors 65816
Sep 29, 2008
1,258
1,850
Apple is barely paying taxes in the US.
What constitutes "barely"? Apple pays an effective rate of 21% on foreign earnings: https://www.apple.com/newsroom/2017/11/the-facts-about-apple-tax-payments/ with the U.S. rate (before the most recent tax bill, which has unclear results on effective tax rates) estimated to be around 18%: https://www.ped30.com/2017/11/20/apple-tax-rate/. I should note that that estimate is lower than's Apple's self-declared effective rate of about 24 - 25%. So the reality (again before the new tax bill that has yet unknown effects on long-tern effective corporate tax rates) is Apple pays a minimum of a 20% tax rate in the U.S. after accounting for accounting manipulations. That puts Apple at paying an effective tax rate similar to the average for the top quintile of households (and higher on average than 80% of households).

Should Apple pay higher corporate taxes? That's opinion based on economic ideology and theory. Economists and politicians have been arguing over questions like that for a long time.
 
  • Like
Reactions: agsystems

BvizioN

macrumors 603
Mar 16, 2012
5,038
2,965
Manchester, UK
Its easy to look at two adjacent years and not see particular price rises, but over time you can see the increase in price due to both price rises and currency fluctuations. Apparently Apple fans could also see the marvelous, the gorgeous, the beautiful robe on that emperor.:D
Someone has to be absolutely blind not to see the increased quality of materials used on the X models, particularly the display that the beloved Samsung sells to Apple on the highest price possible. Now if people use the gift that nature has given them (called a brain) and they do the math, they would realize that Apple by doing so it adds to the cost of the X versions. But it is like I said earlier, make a trash version of iPhone, dedicated only to moaners. sell it dirt cheap (much cheaper than iPhone XR but also much lower quality) and the world would be on pace ;)
 

ThunderSkunk

macrumors 68030
Dec 31, 2007
2,928
2,426
Milwaukee Area
Can someone explain, why would a company with majority of its R&D spent in US, and purchase component from Global sources, need to pay Tax in France? And What % does it need to pay?
When selling your products in a foreign country, to that country’s public, you expect to pay the taxes required by that country to that country. Otherwise you do not sell there. At no point does the location of where the majority of your R&D budget is spent, or where you bought the components and subassemblies and labor to assemble it have anything to do with it. You are showing up in a country and exchanging your gods and services for their people’s money, so you operate under that country’s rules and pay their fees and taxes to do so. We do it, you would have to do it, Apple will have to do it. Some country’s are easy to figure out, some are more complicated. That’s why you employ accountants who understand international trade with that country and it’s rules. They sit down and figure it out. “But taxes are too hard for me to figure out” is not a valid excuse for not paying your taxes. ...outside this country anyway.
 
Last edited:

robinp

macrumors 6502
Feb 1, 2008
418
434
Can someone explain, why would a company with majority of its R&D spent in US, and purchase component from Global sources, need to pay Tax in France? And What % does it need to pay?
I suppose you could try to answer this technically (I'm no tax expert) or you could answer about ethics.

In my opinion, any entity that sells anything into a country could / should be liable for tax in that country. To allow outside entities to avoid local taxes simply puts local companies at a huge competitive disadvantage. It also means that vast sums of money would leave countries and eventually would entirely undermine local economies and therefore governments' abilities to raise taxation to fund public services.

Following through with a hypothetical situation where an external entity could justify paying of no tax when selling to into a different territory would eventually result in the breakdown of order and wider society.
 

Carnegie

macrumors 6502a
May 24, 2012
615
1,336
Can someone explain, why would a company with majority of its R&D spent in US, and purchase component from Global sources, need to pay Tax in France? And What % does it need to pay?
The answer to your questions is, it depends.

Income tax accounting can be complicated, especially when multiple tax jurisdictions are involved. But a couple of basic concepts applied by the tax policies of most advance economies are these: (1) Value creation and (2) Permanent Establishment.

Generally speaking, income taxes are applied where value is created, not necessarily where purchases are made. That isn't because of companies using loopholes, that's a fundamental implementation concept which various tax jurisdictions have essentially agreed on. It's done that way for good reasons, and tax jurisdictions choose that basic model because they believe it's to their benefit. They get to tax economic activity that happens within their jurisdiction based on value being created there (they wouldn't want to to lose that tax revenue just because products got sold in other jurisdictions), and they also get to - if they choose to - capture tax revenue from sales transactions that happen within their jurisdictions by applying sales taxes or VATs. It's win-win for the tax man.

So, you're right, to the extent we're talking about products being designed in the U.S., and embodied IP being owned in the U.S., we're talking about value being created in the U.S. and (income) taxable by the United States. (To be clear, Apple's R&D expenses are largely shared with its Irish subsidiaries.)

But some of the value created can occur in other nations such as France. For instance, if Apple has retails stores in France then those stores can themselves make money. There is some value creation there. It's comparable to a third-party store making money selling products, to include Apple products. The share of Apple profits fairly attributable to retail stores is relatively small though. Those stores are, in effect, not realizing large retail margins on the Apple products they sell, so they aren't really as profitable as they might otherwise be. The money is mostly made selling Apple products to the retail stores. And Apple has comparable third-party sales to use in determining favorable transfer pricing which complies with the arms-length principles that many tax jurisdictions require to be applied. But, regardless, Apple still likely shows some profit from its retail stores. Other kinds of operations - e.g. distribution centers or sales promotions operations - can also mean some amount of value creation in other jurisdictions.

That kind of value creation depends largely on the concept of permanent establishments. A company like Apple can sell into a country or it can sell in a country. Generally speaking, selling into a country doesn't create taxable income there. It means not having a permanent establishment there that is doing the business. If a company does have a permanent establishment (e.g. a retail store or a distribution center) there, then it can sell in the country through that establishment. That establishment (or multiple establishments) can create some value in the country. It represents economic activity which is occurring in the country, rather than stuff just being sold into the country. What is considered a permanent establishment depends on the tax policies of the relevant jurisdiction.

Anyway, the point is that Apple likely does make some relatively small amount of income in France. Just selling stuff there doesn't make that the case. Selling into France (e.g. US Apple selling products to Apple stores in France) doesn't represent economic activity which, under general income tax policies, is taxable. But to the extent Apple has permanent establishments in France, they are engaging in economic activity which might produce taxable income.

To be clear, here I'm only talking about income tax concepts in broad strokes. I'm not trying to get into the details of the tax policies of particular jurisdictions. I'm not familiar enough with the specifics of, e.g., French income tax policies to describe how they work beyond the basic concepts which are in play.
 
  • Like
Reactions: ksec

apolloa

Suspended
Oct 21, 2008
12,318
7,795
Time, because it rules EVERYTHING!
Theresa May would probably just give it away to the DUP… instead of spending it on the NHS.
Nah more likely to waste it on a pointless train set no one wants..

Anyway hopefully this is a start to get the big companies to pay up like Apple, from ALL nationalities. And get the damn loopholes closed off already! All of them.

And this is over 500 million extra on top of the was it 12 billion? It owes the EU.
 

Unregistered 4U

macrumors 6502a
Jul 22, 2002
844
454
Taxing labour only makes production in western countries expensive, driving away jobs to (e.g.) China.
Yeah, because the cost of labor in western countries really has NOTHING to do with the fact that employees in western countries kinda LIKE making 30 dollars an hour over 3 dollars an hour. It’s the TAXES that make that 27 dollar difference!!
 

SarcasticJoe

macrumors 6502a
Nov 5, 2013
604
214
Finland
Can someone explain, why would a company with majority of its R&D spent in US, and purchase component from Global sources, need to pay Tax in France? And What % does it need to pay?
When you operate in a country and make a profit there, you have to pay a tax on that profit. Apple's tax problems in Europe are to do with how they've exploited loopholes and even broken EU rules with things like the Irish deal.

As for why they haven't dealt with it by now, they probably knew that loopholes are always a game of whack-a-mole and attacking tax deals like the ones Ireland and Luxenburg like to make (in secret) can be argued to be an attack on their sovereignty. However now that people are well and truly fed up with box companies dodging taxes the whack-a-mole is worth it and the national sovereignty card is bound to face a backlash so big it's not worth trying to play.

And this is over 500 million extra on top of the was it 12 billion? It owes the EU.
As far as I can tell it's on top of the Irish thing and that back tax payment is to Ireland, not the EU. It's not about the EU collecting taxes for itself, but to ensure an equal playing field within the European common market.

Oh and before anyone asks, you can set your national corporate tax rate as low as you want, Estonia doesn't have any corporate tax (thou they do make up for it with really high capital gains tax), you just have to apply it to every company that operates in your country.
 
Last edited:

ryanwarsaw

macrumors 68030
Apr 7, 2007
2,601
2,205
Given how the sales are not as expected, he may not be able to do so.
Probably not but those type of posts make the poster feel original, edgy and witty. If the post accomplishes half of that they will consider it the internet comment of the day.
 

WoodpeckerBaby

macrumors 6502
Aug 17, 2016
358
293
Can someone explain, why would a company with majority of its R&D spent in US, and purchase component from Global sources, need to pay Tax in France? And What % does it need to pay?
local EU sales tax usually ~20% same in UK, it's called VAT value added tax.
[doublepost=1549376821][/doublepost]
I don't know the details here, but tax evasion is a common game with multi-national companies.

Starbucks for example does not make any profits in Germany for years, at least according to their tax statements. So, why keep the stores open? Well, if you just shift your profits by making your stores pay "license fees" to its mother company and list those as costs, then you don't make any profits.
That's how we operate. Apple Pay itself IP fees from country A to B in BVI.
 

Carnegie

macrumors 6502a
May 24, 2012
615
1,336
Nah more likely to waste it on a pointless train set no one wants..

Anyway hopefully this is a start to get the big companies to pay up like Apple, from ALL nationalities. And get the damn loopholes closed off already! All of them.

And this is over 500 million extra on top of the was it 12 billion? It owes the EU.
It's likely this would reduce the amount owed to Ireland (I assume that's what you're referring to) if Apple and Ireland ultimately lose their appeals.

Likely we're dealing with transfer pricing issues here - determining where a given amount of income is properly taxable. In accordance with the tax policies of various jurisdictions, companies determine where they believe various amounts of income are properly taxable. During regular audits of those companies' tax filings, those jurisdictions sometimes disagree when it comes to how their tax policies should be applied to particular circumstances. If the companies don't agree that the tax jurisdictions' interpretations are correct, disputes can persist for many years until settlements are reached or relevant adjudicators (e.g. courts) make final decisions. If you read enough companies' financial filings, you'll find comments about tax audits from many years prior not being closed out yet - indications that certain issues remain in dispute. It's the nature of the beast with complicated tax laws that can vary between jurisdictions.

Anyway, if France believes (and Apple now agrees) that more Apple income was properly taxable in France, that likely means that less was properly taxable in Ireland (and, perhaps, ultimately in the U.S.).
 

Plutonius

macrumors G3
Feb 22, 2003
8,229
6,923
New Hampshire, USA
When you operate in a country and make a profit there, you have to pay a tax on that profit. Apple's tax problems in Europe are to do with how they've exploited loopholes and even broken EU rules with things like the Irish deal.
Wasn't it Ireland who broke the EU laws by offering Apple the tax rates ?

I'm not sure how it where you are, but in the US everything is about deductions and loopholes when doing taxes (both personal and business). Apple would be remiss to it's shareholders if it paid more taxes then it had to.

And get the damn loopholes closed off already! All of them.
If the entity charging the taxes doesn't like the loopholes or deductions, they are free to eliminate them. Retroactively charging people or companies for tax loopholes or deductions that were eliminated is wrong.
 

Carnegie

macrumors 6502a
May 24, 2012
615
1,336
local EU sales tax usually ~20% same in UK, it's called VAT value added tax.
[doublepost=1549376821][/doublepost]

That's how we operate. Apple Pay itself IP fees from country A to B in BVI.
Is this about VAT taxes that Apple should have collected and remitted but didn't? Or is it about income taxes? I had assumed the latter, but perhaps it is the former.
 

[AUT] Thomas

macrumors 6502
Mar 13, 2016
411
353
Graz [Austria]
What constitutes "barely"? Apple pays an effective rate of 21% on foreign earnings: https://www.apple.com/newsroom/2017/11/the-facts-about-apple-tax-payments/ with the U.S. rate (before the most recent tax bill, which has unclear results on effective tax rates) estimated to be around 18%: https://www.ped30.com/2017/11/20/apple-tax-rate/. I should note that that estimate is lower than's Apple's self-declared effective rate of about 24 - 25%. So the reality (again before the new tax bill that has yet unknown effects on long-tern effective corporate tax rates) is Apple pays a minimum of a 20% tax rate in the U.S. after accounting for accounting manipulations. That puts Apple at paying an effective tax rate similar to the average for the top quintile of households (and higher on average than 80% of households).
I admit, "barely" was a bit exaggerated. Especially now with the new tax rate and repatriation things have shifted and that's still a more recent development, also, I don't trust Apple's "self certification" on tax payments. If they pay >20% now it's indeed a fair percentage, as afaik the nominal rate is now 21% in the US. Anyway, this is to be revisited in 1-2 years as I doubt anyone except Apple management sees the big picture. (2018 just finished and Apple's growth pattern in a long time changed negatively (dip in Q4) and iirc they started buying back stocks with actual cash,... which also were more volatile recently.)
 

ksec

macrumors 65816
Dec 23, 2015
1,071
1,032
The answer to your questions is, it depends.

Income tax accounting can be complicated, especially when multiple tax jurisdictions are involved. But a couple of basic concepts applied by the tax policies of most advance economies are these: (1) Value creation and (2) Permanent Establishment.

Generally speaking, income taxes are applied where value is created, not necessarily where purchases are made. That isn't because of companies using loopholes, that's a fundamental implementation concept which various tax jurisdictions have essentially agreed on. It's done that way for good reasons, and tax jurisdictions choose that basic model because they believe it's to their benefit. They get to tax economic activity that happens within their jurisdiction based on value being created there (they wouldn't want to to lose that tax revenue just because products got sold in other jurisdictions), and they also get to - if they choose to - capture tax revenue from sales transactions that happen within their jurisdictions by applying sales taxes or VATs. It's win-win for the tax man.

So, you're right, to the extent we're talking about products being designed in the U.S., and embodied IP being owned in the U.S., we're talking about value being created in the U.S. and (income) taxable by the United States. (To be clear, Apple's R&D expenses are largely shared with its Irish subsidiaries.)

But some of the value created can occur in other nations such as France. For instance, if Apple has retails stores in France then those stores can themselves make money. There is some value creation there. It's comparable to a third-party store making money selling products, to include Apple products. The share of Apple profits fairly attributable to retail stores is relatively small though. Those stores are, in effect, not realizing large retail margins on the Apple products they sell, so they aren't really as profitable as they might otherwise be. The money is mostly made selling Apple products to the retail stores. And Apple has comparable third-party sales to use in determining favorable transfer pricing which complies with the arms-length principles that many tax jurisdictions require to be applied. But, regardless, Apple still likely shows some profit from its retail stores. Other kinds of operations - e.g. distribution centers or sales promotions operations - can also mean some amount of value creation in other jurisdictions.

That kind of value creation depends largely on the concept of permanent establishments. A company like Apple can sell into a country or it can sell in a country. Generally speaking, selling into a country doesn't create taxable income there. It means not having a permanent establishment there that is doing the business. If a company does have a permanent establishment (e.g. a retail store or a distribution center) there, then it can sell in the country through that establishment. That establishment (or multiple establishments) can create some value in the country. It represents economic activity which is occurring in the country, rather than stuff just being sold into the country. What is considered a permanent establishment depends on the tax policies of the relevant jurisdiction.

Anyway, the point is that Apple likely does make some relatively small amount of income in France. Just selling stuff there doesn't make that the case. Selling into France (e.g. US Apple selling products to Apple stores in France) doesn't represent economic activity which, under general income tax policies, is taxable. But to the extent Apple has permanent establishments in France, they are engaging in economic activity which might produce taxable income.

To be clear, here I'm only talking about income tax concepts in broad strokes. I'm not trying to get into the details of the tax policies of particular jurisdictions. I'm not familiar enough with the specifics of, e.g., French income tax policies to describe how they work beyond the basic concepts which are in play.
Thanks. Out of the ~5 Quoted reply it become obvious most of the people doesn't have the faintest idea about tax. The problem is that assuming the value creation within France, as in Store and Distribution Centre etc is greater than the money deducted from its Operation. I.e If Apple US Sold iPhone XS to Apple France for $800; inclusive of IP, Apple France sell at Apple Store for $999, and $899 to wholesale and carrier. Apple France made roughly $99 - $199 per phone. These profits ( Gross Income ), once subtracted the rent of Apple Store, Operation Cost such as office and headcount become Zero.

How do you tax against Zero Profits? Because from what I am understanding a lot of people are arguing for either Tax against Gross Income, or Tax against Revenue.
[doublepost=1549377641][/doublepost]
I admit, "barely" was a bit exaggerated. Especially now with the new tax rate and repatriation things have shifted and that's still a more recent development, also, I don't trust Apple's "self certification" on tax payments. If they pay >20% now it's indeed a fair percentage, as afaik the nominal rate is now 21% in the US. Anyway, this is to be revisited in 1-2 years as I doubt anyone except Apple management sees the big picture. (2018 just finished and Apple's growth pattern in a long time changed negatively (dip in Q4) and iirc they started buying back stocks with actual cash,... which also were more volatile recently.)
I am sorry not only it is not "exaggerated" it was flat out wrong. Although you may not read it on the news some shareholders actually complains about Apple being too "good" on its own country's tax code, when it has tools to paid a lot less. The Apple Annual Report is one of the easier to read out of all the Mega Corp, and they are not hiding much. ( Apart from Unit Sales )
[doublepost=1549377811][/doublepost]
local EU sales tax usually ~20% same in UK, it's called VAT value added tax.
I am not aware Apple missing a single dollar ( of Pounds ) of UK VAT. Which is included in every purchase of UK's Apple product.
 

Freida

macrumors 68000
Oct 22, 2010
1,972
2,415
Barely? Seriously? Or have you got it mixed up with Amazon ? Apple is the largest tax paying Company in US
He is right. Considering the earnings, Apple pays almost nothing. They use all the legal loopholes etc. to pay as little as possible to make it legal.
Imagine if all citizens had their taxes done by Apple's finance team. I can assure you that globally, the tax would get reformed everywhere.

I pay around 40% on taxes and yet these massive corporations who make billions are paying peanuts compared to us. I understand its a bit different but the illustration is there.

Ireland should close the loop hole and Apple should pay taxes in all countries where they do business and make profit. Simple as that.
 

fathergll

macrumors 65816
Sep 3, 2014
1,454
879
Nothing new. Nobody wants to pay more taxes to big government. Heck the American colonies went to war with England over taxes.

Average joes do this every year in the U.S. with hiring accountants and trying to find any way of using deductions ...etc.
 

Carnegie

macrumors 6502a
May 24, 2012
615
1,336
Thanks. Out of the ~5 Quoted reply it become obvious most of the people doesn't have the faintest idea about tax. The problem is that assuming the value creation within France, as in Store and Distribution Centre etc is greater than the money deducted from its Operation. I.e If Apple US Sold iPhone XS to Apple France for $800; inclusive of IP, Apple France sell at Apple Store for $999, and $899 to wholesale and carrier. Apple France made roughly $99 - $199 per phone. These profits ( Gross Income ), once subtracted the rent of Apple Store, Operation Cost such as office and headcount become Zero.

How do you tax against Zero Profits? Because from what I am understanding a lot of people are arguing for either Tax against Gross Income, or Tax against Revenue.
[doublepost=1549377641][/doublepost]

I am sorry not only it is not "exaggerated" it was flat out wrong. Although you may not read it on the news some shareholders actually complains about Apple being too "good" on its own country's tax code, when it has tools to paid a lot less. The Apple Annual Report is one of the easier to read out of all the Mega Corp, and they are not hiding much. ( Apart from Unit Sales )
Yes, some people are unrealistic when it comes to taxation issues. Some seem to think revenue should be taxed and that deducting expenses to determine taxable income is somehow using a loophole. Some seem to think income should be taxed not only where it is created but also wherever sales occur. That's unrealistic. There are sales taxes and VATs to capture tax revenue where sales occur. You can't tax sales as income and jurisdictions generally don't do so because they don't want other jurisdictions to tax the income legitimately made within their own jurisdiction just because sales happen elsewhere. We can't have an international tax system that applies layers and layers of taxation on the same income and same economic activity. (Situations are already bad enough as it is when it comes to multiple layers of taxation.)

As for your first paragraph, I suspect that is the issue: Determining how much profit actually was legitimately made in France. It likely isn't zero, but neither is it a huge amount relative to the amount of profit which Apple makes from sales in France. Likely most of its profit from France comes from selling into France, not from selling in France. The former would, for the most part, be properly taxable in Ireland or the United States.

As for your last paragraph, I think that's missed by many. The notion that Apple employs all kinds of accounting tricks to avoid paying fair income taxes in the United States is hogwash. There may be room to argue about what it does to avoid paying income taxes in other jurisdictions (though a lot of arguments made regarding that are bunk as well). But when it comes to U.S. income taxes, it seems that Apple doesn't try hard to avoid paying income taxes on income legitimately created in the United States. It probably could, legally, greatly reduce its U.S. income tax liability if it wanted to.
 
  • Like
Reactions: ksec

simonmet

macrumors 68020
Sep 9, 2012
2,209
2,997
Sydney
Tim ain’t gonna be happy about this. Be prepared for a price hike of 2019’s iPhone.
Can’t wait for the first AUD $3,000 iPhone! /s

Be nice if the politicians in my country did something ... anything. Not too long until we boot them out.
 
Last edited: