Apple Inc. (NASDAQ:AAPL) warned its shareholders that the company may be subjected to changed tax rates based on the new international tax legislation. The U.S. Company told that even though the majority if its hardware is manufactured in Asia, final assembly of certain products is carried at its manufacturing facility in Cork, Ireland.
“Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change,” the company wrote in its annual 10-K filing to the Securities and Exchange Commission.
Apple may face higher tax rate
It further added that the European Commission may suggest some changes to the company’s existing tax policies, which may result in higher taxes in the future. More importantly, the EC could ask Ireland to recover past taxes from Apple deemed to have constituted state aid.
All of Apple Inc. (NASDAQ:AAPL) Irish subsidiaries are based in Cork, where the company employs over 4000 workers. As per the letter from the EC, the U.S. Company paid less than €20 million ($US25.4 million) in taxes in Ireland for years 2010-2012. These taxes were paid using two the company’s Irish subsidiaries, which the commission is inquiring.
In total, Apple has earned around $70 billion in profits from non-U.S. operations, and this amount has not been subjected to the U.S. corporation tax. Majority of the profits are attributable to the company’s subsidiaries “organized in Ireland”.
Investors need not worry much
European Commission, in a September letter, revealed that in a “preliminary view” they have found that the 1991 and 2007 tax deals with Apple in Ireland constituted state aid.
At that time, Apple Inc. (NASDAQ:AAPL) responded that it “received no selective treatment from Irish officials over the years,” and in reality the tax it paid in Ireland and in other countries has grown “tenfold” since 2007. The California-based company, further, clarified that it is subjected to the same tax laws as “other companies who do business in Ireland.”
Experts believe that there are chances that Apple is asked to pay up to $US200 million in back taxes. Also, the company may reach a settlement to pay a lower amount or no money at all depending on the stance of the Irish authorities.
Investors should take the warning from Apple Inc. (NASDAQ:AAPL) lightly as it is in the normal course of the public companies to explain the shareholders of the so-called “risk factors” that may impact the financial results.