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Apple tax rate on foreign profit: 1.9%

Legal tactics let it shelter income

Apple Inc., the world’s most valuable company, had $82.6 billion in cash held abroad as of Sept. 29.

Vincent Yu/Associated Press

Apple Inc., the world’s most valuable company, had $82.6 billion in cash held abroad as of Sept. 29.

NEW YORK — Apple Inc. paid an income tax rate of 1.9 percent on its earnings outside the United States in its latest fiscal year, a regulatory filing by the company shows.

The world’s most valuable company paid $713 million in tax on foreign earnings of $36.8 billion in the fiscal year ended Sept. 29, according to a financial statement filed Oct. 31. The foreign earnings were up 53 percent from fiscal 2011, when Apple earned $24 billion abroad and paid income tax of 2.5 percent.

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The technology giant’s foreign tax rate compares with the general US corporate tax rate of 35 percent.

Apple may pay some income taxes on its profit to the country in which it sells its products, but it minimizes them by using various accounting moves to shift profits to countries with low tax rates. For example, the strategy known as ‘‘Double Irish With a Dutch Sandwich,’’ routes profits through Irish and Dutch subsidiaries and then to the Caribbean.

Other multinational corporations also use such tax techniques, which are legal.

Like other big companies, Apple leaves cash overseas. If it brought it to the United States it would have to pay corporate taxes. The cash that Apple had left overseas as of Sept. 29 had mounted to $82.6 billion, up from $74 billion on June 30.

Where Apple does differ from other companies is that it sets aside a portion of the foreign profits, marking them subject to US taxes sometime in the future.

Overall, Apple had net income of about $41.7 billion, or $44.15 per share, in fiscal year 2012.

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When Apple reports quarterly results, it records that portion of the taxes as a liability, which is subtracted from its profits even though it hasn’t actually paid the taxes.

Tax experts say the company could easily eliminate these ‘‘phantom’’ tax obligations. That would boost Apple’s profits for the past three years by as much $10.5 billion, according to calculations by The Associated Press reported in July.

While investors might rejoice if Apple suddenly added $10.5 billion to its profits, unilaterally erasing a massive US tax obligation could tarnish its reputation as a relatively responsible payer of US taxes.

Instead, the company is lobbying to change US law so it can erase its liabilities in a less conspicuous fashion.

Overall, Apple had net income of $41.7 billion, or $44.15 per share, in fiscal 2012.

That was up 61 percent from $25.9 billion, or $27.68 per share, in fiscal 2011.

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