THE ELECTRONICS GIANT Apple legally avoided paying as much as $2.4bn (£1.5bn) in taxes last year, according to reports.
The iPod manufacturers set up offices in US, Netherlands, Luxembourg and The British Virgin Islands in order to guarantee it paid 9.8% tax, according to The New York Times.
While Apple is headquartered in Cupertino, California, its subsidiary Braeburn Capital - which invested and managed Apple's money - is also based in Reno, Nevada, where there is no corporation tax.
Through this method, Apple paid $3.3bn tax on its $34.2bn profits, a tax rate of 9.8%.
As Nevada imposes no corporation tax and no capital gains tax, by opening an office in the state it avoids the 8.84% corporation tax it would incur in its home state of California.
Apple has utilised similar schemes abroad, so much so that 70% of its profits are earned in other countries.
Chief among these involved directing profits through Irish subsidiaries, the Netherlands and then onto the Caribbean, dubbed ‘Double Irish With A Dutch Sandwich'.
A subsidiary in Luxembourg called iTunes S.à r.l deals with 20% of iTunes sales worldwide, despite having a only a few dozen employees.
Ex-Apple executive Robert Hatta told The New York Times: "We set up in Luxembourg because of the favorable taxes. Downloads are different from tractors or steel because there's nothing you can touch, so it doesn't matter if your computer is in France or England. If you're buying from Luxembourg, it's a relationship with Luxembourg."
Further subsidiaries were set up in the Republic of Ireland due to the favourable tax conditions there.
Apple Operations International and Apple Sales International served to allow royalty payments to be made via the Irish jurisdiction rather than through California, where it would have attracted a 35% instead of the 12.5% Ireland offered.
The Ireland-based Apple Sales International also directed profits to the Caribbean where Apple has set up another business called Baldwin Holdings in the low-tax area of the British Virgin Islands.
Tax treaties Ireland holds with other European nations also mean that the Eire-based subsidiaries could also be used to send money to Holland, thereby reducing its tax liability further.
In a statement, a spokesman for Apple said: "Apple has conducted all of its business to the highest ethical standards, complying with the applicable laws and accounting rules. We are incredibly proud of Apple's contributions."
You may also like
AccountancyAgeInsight is a frequently updated resource centre for finance professionals, offering a free and easy-to-use digital library of briefings, white papers and other information resources.