Apple’s Corporate Structures Allow Tax Avoidance, Says U.S. Senate Report


After a lengthy investigation, the Senate Permanent Subcommittee on Investigation led by Senators Carl Levin and John McCain found that Apple set up corporate structures that allowed the company to pay little or no corporate tax on a big chunk of its overseas income, The Wall Street Journal reports.

The published reports come hot on the heels of Apple’s release of 17 pages of testimony prior to the U.S. Subcommittee investigation on tax practices.

The report seems to reinforce an earlier New York Times investigation which stated that Apple pioneered its famous “double Irish with a Dutch sandwich” technique to avoid paying taxes.

Apple has devoted a major part of its testimony to defending its use of five subsidiaries based in Ireland: Apple Operations International, Apple Operations, Apple Operations Europe, Apple Sales International and Apple Distribution International.

These subsidiaries are key players because — as the investigation has found — Irish tax law only considers companies as residents if they are managed and controlled there. The IRS, meanwhile, only counts corporations as American if they are incorporated here, The Wall Street Journal reports.

Here is what the Apple statement says about AOI, reported by Fortune’s Philip Elmer-Dewitt:

AOI is incorporated in Ireland; thus, under US law, it is not tax resident in the US. AOI is also not tax resident in Ireland because it does not meet the fact-specific residency requirements of Irish law.

The WSJ points to several findings of the lengthy investigation including how AOI doesn’t qualify as a tax resident of any other country under the applicable local laws, or how ASI (Apple Sales International) only paid a 0.05% tax rate in 2011. A third Apple subsidiary, AOE (Apple Operations Europe), maintains that its corporate profits aren’t taxable by any country.