SEC Clears Apple Tax Practices

SEC Clears Apple Tax Practices

The Securities and Exchange Commission has cleared Apple Inc. of any potential tax law violations after months of examining the company’s complex and sometimes controversial financial and tax practices.

According to Forbes, the SEC has given Apple the green ligh to continue utilizing its existing tax strategies and even wrote a letter to affirm that the company’s financial and tax maneuvering fall in line with generally accepted accounting practices. This includes the use of the so-called “Double Irish and the Dutch Sandwich,” which has made headlines recently as a controversial tax strategy.

Under this method – which has been used by behemoths such as Google, Facebook, and Hewlett Packard – companies set up Irish and Dutch subsidiary companies in low- or no-tax jurisdictions. They can then funnel profits through the first Irish subsidiary to the Dutch company, and then back to a second Irish subsidiary which sends the profits to a tax haven. Google was able to funnel roughly $12 million in royalty payments to Bermuda last year – 25 percent more than in 2011 – and reduce its overseas tax rate to about five percent. Now that Apple has been cleared for similar methods, it’s speculated that more corporations may follow suit.

For instance, Twitter is expected to adopt this tax practice in the future, as it has recently set up an international company “Twitter International Company” in Ireland, according to Daily Gadgetry. Rather than paying the 35 percent corporate tax rate if the company funneled profits back to the U.S., Twitter could end up paying a significantly lower rate in Ireland. However, it would still be subject to the 35 percent rate if it decided to repatriate profits to the U.S.

Although more tax law cases are emerging that call corporate strategies into question, new legislation prohibiting long-established practices has yet to be introduced.