Apple is lobbying for changes in the law to avoid heavy taxes and is in talks with the Indian government
Apple: Apple is lobbying for changes to the income tax law in India to avoid paying taxes on iPhone machinery supplied to contract manufacturers. The company says current rules are hindering its expansion plans.
Apple is lobbying for changes to India's income tax law to avoid paying taxes on the ownership of high-end iPhone machinery supplied to contract manufacturers. Apple believes current rules could hinder its future expansion plans.
Apple is expanding its presence in India. It is diversifying beyond China. According to Counterpoint, iPhone market share in the Indian market is projected to double to 8% by 2022. China still accounts for 75% of global iPhone shipments. India's share is projected to quadruple to 25% by 2022. Apple's contract manufacturers, Foxconn and Tata, have spent billions of dollars to open five plants, but millions of dollars of this money go toward purchasing expensive machinery for iPhone assembly. If Apple changes its business practices without persuading the Indian government to change the law regarding foreign ownership of equipment used in India, it could face billions of dollars in additional taxes.
Apple purchases the machinery used to manufacture iPhones in China and supplies it to its contract manufacturers. These are tax-free, even though it owns them. However, this is not possible in India because the Income Tax Act considers such ownership by Apple to be a so-called business relationship, subjecting its iPhone profits to Indian taxation.
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Apple executives have recently held talks with Indian authorities to change the law. They fear that the current law could hinder their future growth. Contract manufacturers cannot invest beyond a certain limit. If the old law is changed, it would make it easier for Apple to expand. This could make India more competitive globally.
An official said, "Discussions are ongoing on taxation rules affecting Apple. The government is cautious because a change in the law could undermine its sovereign right to tax a foreign company. India needs investment. A solution must be found."
If Apple's activities constitute a business relationship, global revenue could be used as a basis for calculating income in India. This could lead to tax exposures worth billions of dollars. Taiwan's Foxconn is Apple's largest contract manufacturer in India.
