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I'd like a Double Irish With A Dutch Sandwich please.

Submitted by Roanman on Tue, 05/01/2012 - 07:36

 

The funniest thing to me about the growing brewhaha over Google and now Apple's perfectly legal (and dare I say it? ... moral) by the letter application of our moronic tax code is the fact that their approach is so well known and by the way so pervasive, that not only does it have a name, "Double Irish With A Dutch Sandwich" it also has a Wikipedia page.

From Wikipedia.

As always click anywhere below for the entire article.

 

Double Irish arrangement

 

Overview

Typically, the company arranges for the rights to exploit intellectual property outside the United States to be owned by an offshore company. This is achieved by entering into a cost sharing agreement between the U.S. parent and the offshore company, in the terms of U.S. transfer pricing rules. The offshore company continues to receive all of the profits from exploitation of the rights outside the U.S., without paying U.S. tax on the profits unless and until they are remitted to the U.S.[2]

It is called "The Double Irish" because it requires two Irish companies to complete the structure. The first Irish company is the offshore company which owns the valuable non-U.S. rights. This company is tax resident in a tax haven, such as Bermuda or the Cayman Islands. Irish tax law provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Irish company not to be tax resident in Ireland. The first Irish company licenses the rights to a second Irish company, which is tax resident in Ireland, in return for substantial royalties or other fees. The second Irish company receives income from exploitation of the asset in countries outside the U.S., but its taxable profits are low because the royalties or fees paid to the first Irish company are deductible expenses. The remaining profits are taxed at the Irish rate of 12.5%.

For companies whose ultimate ownership is located in the United States, the payments between the two related Irish companies might be non-tax-deferrableand subject to current taxation as Subpart F income under the Internal Revenue Service's Controlled Foreign Corporation regulations if the structure is not set up properly. This is avoided by organizing the second Irish company as a fully owned subsidiary of the first Irish company resident in the tax haven, and then making an entity classification election for the second Irish company to be disregarded as a separate entity from its owner, the first Irish company. The payments between the two Irish companies are then ignored for U.S. tax purposes.[1]

 

Dutch Sandwich

The addition of a Dutch Sandwich to the Double Irish scheme further reduces tax liabilities. Ireland does not levy withholding tax on certain receipts fromEuropean Union member states. Revenues from income of sales of the products shipped by the second Irish company are first booked by a shell company in the Netherlands, taking advantage of generous tax laws there. Funds needed for production cost incurred in Ireland are transferred there, the remaining profits are transferred to the first Irish company in Bermuda. If the two Irish holding companies are thought of as "bread" and the Netherlands company as "cheese," this scheme is referred to as the "Dutch Sandwich."[3] The Irish authorities never see the full revenues and hence cannot tax them, even at the low Irish corporate tax rates. There are equivalent Luxembourgeois and Swiss sandwiches.

 

Companies using the arrangement

Major companies known to employ the Double Irish strategy are:

 

I left the list out just because I wanted you to give Wikipedia a click as I couldn't figure a way to abbreviate this post and still have it make sense.

The moral remains constant.

The lower the rate, the less incentive to create and exploit loopholes in your tax code and more importantly the greater the incentive you create for the rest of the world to bring their taxable income to you.

That's a good thing.

Best of all, the only cost of this approach accrues to your corrupted government types who lose the ability to exchange tax writing favors for political power.

Be still my beating heart.

 

How Apple Sidesteps Billions in Global Taxes

Submitted by Roanman on Sat, 04/28/2012 - 21:08

 

From The New York Times, here's yet another lesson on the consequences of our dumbass tax policies.

As always click on either photo for the entire piece.

Recommended.

 

How Apple Sidesteps Billions in Global Taxes

Published: April 28, 2012  By  and 

 

                       

Braeburn Capital, an Apple subsidiary in Reno, Nev., manages and invests the company’s cash. Nevada has a corporate tax rate of zero, as opposed to the 8.84 percent levied in California, where Apple has its headquarters.

 

RENO, Nev. — Apple, the world’s most profitable technology company, doesn’t design iPhones here. It doesn’t run AppleCare customer service from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.

Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states.

Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

California’s corporate tax rate is 8.84 percent. Nevada’s?  

Zero.

Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.

Almost every major corporation tries to minimize its taxes, of course. For Apple, the savings are especially alluring because the company’s profits are so high. Wall Street analysts predict Apple could earn up to $45.6 billion in its current fiscal year — which would be a record for any American business.

Apple serves as a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. Some profits at companies like Apple, Google, Amazon, Hewlett-Packard and Microsoft derive not from physical goods but from royalties on intellectual property, like the patents on software that makes devices work. Other times, the products themselves are digital, like downloaded songs. It is much easier for businesses with royalties and digital products to move profits to low-tax countries than it is, say, for grocery stores or automakers. A downloaded application, unlike a car, can be sold from anywhere.

The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed, according to government and corporate data. Over the last two years, the 71 technology companies in the Standard & Poor’s 500-stock index — including Apple, Google, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on average, was a third less than other S.& P. companies’. (Cash taxes may include payments for multiple years.)

 

One city, 22 fake Apple stores

Submitted by Roanman on Fri, 08/12/2011 - 12:18

 

Fom CNN Money

Click on the photo below for the entire piece.

 

One city, 22 fake Apple stores

An official search of Kunming, China, yields a surfeit of unauthorized Apple retail shops

 

 

Three weeks after an American blogger visiting the capital of China's Yunnan province posted the first photographs of a copycat Apple Store so convincing that even some of the sales staff thought they were working for Steve Jobs, Chinese authorities have identified 22 more unauthorized Apple stores in Kunming city.

According to a Reuters report filed Thursday, the shops have been ordered to stop using the Apple (AAPL) logo. It was not clear, however, whether the goods being sold at the stores were real or counterfeit. Or whether the shops were passing themselves off as official Apple retail outlets or simply acting as unauthorized Apple resellers, of which China is replete.

 

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