Apple’s Foreign Tax Rate Just 1.9 Percent

Apple Inc.’s income tax rate on earnings outside the US was just 1.9 percent for the latest fiscal year, according to a regulatory filing by the technology company.

Apple, which is the world’s most valuable company, paid $713 million in tax on foreign earnings, which were $36.8 billion, for the fiscal year ending on September 29, reports USA Today.

The technology company’s foreign earnings were also up 53 percent from the fiscal year of 2011 when they earned $24 billion outside the US, paying an income tax of 2.5 percent.

The tech giant’s foreign tax rate of just 1.9 percent is very small compared with the general US corporate tax rate of 35 percent.

Apple could pay some income taxes on its profit to the countries where its products are sold, but it minimizes the amount it owes by shifting money through various accounting moves to countries that have low tax rates.

These tactics are legal and also used by other multinational corporations. Like other massive companies, Apple leaves some of its cash overseas. This is to avoid paying the 35 percent tax rate the US requires.

While most corporations keep this cash overseas, Apple sets aside some of the money, making them as subject to US taxes in the future, notes MSN News.

Apple reports its quarterly results and records a portion of its taxes as a liability, which subtracts from its profits, despite the fact that it hasn’t actually paid the taxes. Tax experts have said that Apple could eliminate these “phantom” tax obligations, boosting their profits by as much as $10.5 billion in the past three years.

While the company’s investors may be happy if Apple added that much to its profits, the company would tarnish its reputation as a relatively responsible payer of US income taxes.