Apple’s tax affairs under investigation in Spain

Apple, one of the world’s three biggest companies by share price, is also well known for taking advantage of every law in the book to reduce its tax burden.

The Cupertino-based company already faces investigations from the authorities in the United States, Italy and the United Kingdom, as well as the European Commission. Now, the Spanish Tax Agency is looking into its affairs in Spain.

Specifically, the Tax Agency has opened an investigation into the corporate tax, VAT and income tax paid between 2009 and 2012 by Apple Marketing Iberia, a company that describes itself in its annual report as providing sales support, marketing, research and development of related companies. The investigation does not mean that there is necessarily any wrongdoing.

The European Commission opened an investigation in 2014 into Apple’s tax strategies

Apple Marketing Iberia’s task is to take a commission on the sales made by other companies in the group within Spain, which for the present means just one company, Apple Distribution International. Up until four years ago, this commission was known to be 1%, but after EL PAÍS published an article mentioning this figure, the company no longer provides details in its annual report. Assuming the figure has remained the same, sales from Ireland would have risen to more than $2.7 billion.

Nevertheless, the company reported a $4.1 million profit, a 41% increase on the previous year. The Spanish affiliate, one of two that Apple has in Spain, last year paid $3.2 million in corporate tax.

Apple Marketing Iberia channeled all its profits into voluntary reserves. It increased its turnover by 38.9% during the last financial year, from €19.8 million to €27.6 million.

Apple and other large multinationals, many of them also in the technology sector, have created complex structures to transfer profits to countries with lower tax rates, such as Ireland and the Netherlands.

The company is also able to further reduce the tax it pays in Ireland, for example. Apple has a second Spanish subsidiary, Apple Retail, which manages its network of retail outlets, the Apple Stores. Apple Ireland bills Apple Spain for products sold in Spain at high prices so as to keep its profits in Ireland, where taxes are half those in Spain.

But now the US Congress and the European Commission are turning their sights on Apple and other global corporations over these legal, but questionable, practices. The European Commission opened an investigation in 2014 into Apple’s tax strategies that could lead to an $8 billion bill for unpaid back taxes.

English version by Nick Lyne.