| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy

Finfacts changes from 2015


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Global Cost of Living

Irish Tax - Income/Corporate




Content Management by interactivetools.com.

News : Irish Economy Last Updated: Feb 10, 2015 - 12:45 PM

Apple's principal Irish company became stateless for tax purposes from 2006
By Michael Hennigan, Finfacts founder and editor
Jun 12, 2014 - 8:19 AM

Email this article
 Printer friendly page

Apple Operations International, the principal Irish holding company for foreign subsidiaries, was not always stateless for tax purposes based on the last filed accounts in Ireland. It stopped paying tax in Ireland from 2006, based on US Senate Permanent Subcommittee on Investigations evidence.

The most explosive revelation in the May 2013 report [pdf] of the US Senate Permanent Subcommittee on Investigations was Apple’s claim that three key offshore companies were not tax residents of Ireland, where they are incorporated, or of the United States, where Apple executives manage and control the companies. The report said Apple Operations International had "not paid any corporate income tax to any national government in the past 5 years."

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin. “Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed.”

Apple Operations International (AOI) was formerly known as Apple Computer Inc. Limited. The company was incorporated in 1980 as an offshore company with an address at the Cork, Ireland manufacturing facility.

Finfacts had reported in 2004 that Ireland was the world's most profitable country for US corporations, according to analysis by US tax journal Tax Notes. In a study by the journal's Martin Sullivan, it was found that profits made by US companies in Ireland doubled between 1999 and 2002 from $13.4bn to $26.8bn, while profits in most of the rest of Europe fell. In his analysis Sullivan termed Ireland a 'semi-tax haven' for US firms, because firms are involved in real productivity in contrast with locations such as Bermuda.

In 2005, The Wall Street Journal brought attention to Microsoft's efforts to route for example profits on sales in Germany to Dublin on which the software firm paid Ireland at the low headline tax rate of 12.5%. The Journal said a subsidiary, Round Island One Ltd., operated from the offices of a Dublin law firm and was one of the country's biggest companies, with gross profits of nearly $9bn in 2004 but it had no direct staff. Now Google and Facebook are following on Microsoft's trail.

The Journal said much of Round Island's income was licensing fees came from copyrighted software code that originated in the US. Some of the rights to these lucrative assets ended up in Ireland via complex accounting rules on intellectual property

Through a key holding, dubbed Flat Island Co., Round Island licensed rights to Microsoft software throughout Europe, the Middle East and Africa. Thus, Microsoft routed the license sales through Ireland and Round Island paid a total of just under $17m in taxes to about 20 other governments that represented more than 300m people and $300m in taxes to a country of just over 4m.

WSJ report [pdf; free]

In 2006 in reaction to the WSJ piece, Apple had its Irish companies changed to unlimited status and Microsoft had some Irish companies changed to end public access to financial information including on the Irish offshore companies in island tax havens.

Apple had also changed the name of  Apple Computer Inc. Limited to Apple Operations International in 2006 and in the same year as the company was experiencing rapid growth, it established a subsidiary named Braeburn Capital, in Reno Nevada, to avoid California's corporate tax. Its task was to manage investments and tax strategy. Braeburn is a variety of apple.

Apple told the Subcommittee that AOI’s assets are managed by Braeburn Capital. "Apple indicated that the assets themselves are held in bank accounts in New York."

The last accounts filed  for AOI (as  Apple Computer Inc. Limited) was in 2005 in respect of fiscal 2004.

In that year Apple Inc. reported sales of $8.2bn and a net income before tax of $383m; the consolidated Apple Computer Inc. Limited, Cork + its subsidiaries, reported sales of $3.3bn and net income before tax of $345m.

Tax paid to the Irish Revenue was at $21m after offsets for foreign tax and other adjustments.

Once Braeburn Capital  took responsibility for AOI, there was no tax paid in Ireland and cash was routed directly to New York.

The accounts [pdf] show that in 2004, AOI's bank was Bank of America, Dublin; its registered office was in Cork and its auditors and solicitors were also based in Cork.

Prepared by the US Senate Permanent Subcommittee on Investigations, May 2013. Source: Materials received from Apple Inc.

Why did the Irish authorities agree to the change to a stateless status with no taxes due?

The Senate report said: "According to Apple, AOI’s net income made up 30% of Apple’s total worldwide net profits from 2009-2011, yet Apple also disclosed to the Subcommittee that AOI did not pay any corporate income tax to any national government during that period."

When asked whether AOI was instead managed and controlled in the United States, where the majority of its directors, assets, and records are located, Apple responded that it had not determined the answer to that question. Apple noted in a submission to the Subcommittee: 'Since its inception, Apple determined that AOI was not a tax resident of Ireland. Apple made this determination based on the application of the central management and control tests under Irish law.' Further, Apple informed the Subcommittee that it does not believe that 'AOI qualifies as a tax resident of any other country under the applicable local laws.'

For more than thirty years, Apple has taken the position that AOI has no tax residency, and AOI has not filed a corporate tax return in the past 5 years."

Special reports:

EU investigates how Ireland aided Apple to avoid foreign taxes - FDI & Ireland’s love affair with American business

Finfacts April 2014: OECD BEPS Project: Ireland should embrace corporate tax reform

The US tax system is dysfunctional as is the use of Irish offshore companies, which are effectively tax avoidance entities.

In Ireland, different rules applied to companies such as Apple compared with indigenous firms and Enda Kenny, taoiseach, can repeat his talking points: "rules based," "transparent" and "ethical" as often as he likes but nobody should believe him.

Related Articles

© Copyright 2015 by Finfacts.ie

Top of Page

Irish Economy
Latest Headlines
Finfacts launches new news site
Irish Farmers & Milk Prices: 'Shackles' off in April; Demanding safety-net in August
Irish pension managed funds returns at over 12% year-to-date in 2015
Irish chartered accountants' salary packages surge 13% in 12 months
Irish services PMI fastest rate since late 2006; Official data up only 2.4% in 12 months
Irish Economy: Tax €893m above target in year to July — €653m from corporation tax
Fact and Fiction: Time to review Ireland's economic statistics?
Irish M&A deals H1 2015: Dutch or UK firm acquires Irish firm for €32.6bn - they are both American
Irish manufacturing PMI strong in July
Irish Economy: Fall in GNP in Q1 2015; GDP rises
Irish Economy 2015: Central Bank lauds strong recovery; Time to start paying down debt
Irish Budget 2016: Ibec demands 20 tax cuts, spending and investment rises
Low pay in Ireland; Lowest social security & corporate taxes in Europe
Ireland vs Greece: Enda Kenny's false claims on growth, taxes and debt
Irish standard of living in 2014 below Euro Area average, Italian level; Prices 5th highest in EU28
Irish goods exports rose a record 30% in April - due to fake tax-related transactions
Mexican tall ship to sail into Dublin on June 17th
Irish industrial production up 20% in first four months of 2015; Construction down 2.6% in first quarter
Irish Economy 2015: ESRI slams return to boom-time pro-cyclical fiscal policy
Irish pension fund returns in average range 1.6% - 1.8% in May 2015
Irish service sector PMI remains strong; Tax avoidance clouds data
Ireland: Official unemployment rate at 9.8% in May; Broad rate at 19% — 440,000 people
Ireland: Fiscal Council warns of dodgy forecasts, no plan; OECD warns of new property bubble
Irish Public Finances: Tax revenue in first five months of 2015 €734m ahead of target
No simple measure of economic progress in Ireland: GDP & GNP defective
Irish manufacturing PMI rises in May; Production up unbelievable 45% in year to March!
ESRI says data volatility hinders Irish economic forecasting; Tax avoidance taboo cause
Ireland at 16 in international competitiveness ranking; US, Singapore and Hong Kong on top
Irish Economy 2015: Sectors to add 200,000 jobs?; Broad jobless rate at 19%
Irish Export Performance: Myths and reality - Ireland is a poor exporter
Irish Economy: 41,300 jobs added in 12 months to Q1 2015 - Construction up 19,600
China-Ireland: Economic relationship on a slow burn
Estonia, Austria, France, Ireland head global alcohol rankings
Irish Exchequer Returns: Tax receipts under target in April but ahead in year
Irish service sector PMI rose in April
Irish manufacturing PMI remained strong in April- includes overseas manufacturing
Irish Live Register + 90,000 activation scheme numbers at 439,000 in April
Ireland: Coalition drops 2018 full-employment target
Ireland Spring Statement: Noonan promises 200,000 net new jobs by 2018
Irish Economy 2015: Retail sales volume up 1.4% in month of March