4 ms·

A lot of their cash is overseas, and so to bring it back into the US to either issue a dividend (which is suboptimal from a tax perspective) or to buyback their

by yrral 6y ago

A lot of their cash is overseas, and so to bring it back into the US to either issue a dividend (which is suboptimal from a tax perspective) or to buyback their own stock, they need to pay US corporate tax on the income (this is on top of the tax charged in the foreign countries.)

HenryKissinger 6y ago
What do you mean when you say that their cash is overseas? I assume Apple does not have stacks of green bills in giant vaults overseas. Is it in foreign banks?
- i_am_proteus 6y ago
  It's in bank accounts in Ireland.
  - ska 6y ago
    Paying taxes in a country doesn't mean the realized income stays in that country.
- vishnugupta 6y ago
  Indeed, some of it is in banks in tax havens such as Ireland and Singapore. They are also in the form of US treasury bills bought through their offshore entities in the same havens. So I guess at least some money does make it back to the US ;-)
  - nwellnhof 6y ago
    The cash (or other short-term investments) could even be held in US bank accounts owned by non-US subsidiaries of Apple.
    - vishnugupta 6y ago
      For sure! With this offshore thingy one could create a mind bending structure to trap tax authorities in an infinite loop trying to trace the origin. I was completely ignorant about this menace until I started reading couple of books to educate myself —- Treasure Islands and Moneyland...recommend them both. Since then I just use the term offshore to encompass any of those hundreds or so possible structures.
- mmm_grayons 6y ago
  Apple runs what may be the world's largest hedge fund, Braeburn Capital [0], that it uses to invest its cash reserves. But yes, I'm sure a fair amount of it is in foreign bank accounts. https://en.wikipedia.org/wiki/Braeburn_Capital https://en.wikipedia.org/wiki/Braeburn_Capital
- markvdb 6y ago
  A lot of Apple's non-US profits were/are in Bermuda. See https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement .
chrsstrm 6y ago
Not just that US income tax needs to be paid, but also that cash needs to be converted into USD, which poses a problem in relation to fluctuating rates on currency conversion. Currency conversion rates is a running theme in Apple's SEC filings and was also mentioned in yesterday's call. In fact, there is an entire paragraph in last year's annual report that discusses how they built a model to not just optimize conversion to USD, but also predict the total cost so that they could also hedge against it. There's also a note which says their foreign tax obligations are still under review from 2016 forward, so they might be prevented from moving the money until that picture becomes more clear as to how much is owed.

by yrral 6y ago

HenryKissinger 6y ago

What do you mean when you say that their cash is overseas? I assume Apple does not have stacks of green bills in giant vaults overseas. Is it in foreign banks?

i_am_proteus 6y ago
It's in bank accounts in Ireland.
- ska 6y ago
  Paying taxes in a country doesn't mean the realized income stays in that country.
vishnugupta 6y ago
Indeed, some of it is in banks in tax havens such as Ireland and Singapore. They are also in the form of US treasury bills bought through their offshore entities in the same havens. So I guess at least some money does make it back to the US ;-)
- nwellnhof 6y ago
  The cash (or other short-term investments) could even be held in US bank accounts owned by non-US subsidiaries of Apple.
  - vishnugupta 6y ago
    For sure! With this offshore thingy one could create a mind bending structure to trap tax authorities in an infinite loop trying to trace the origin. I was completely ignorant about this menace until I started reading couple of books to educate myself —- Treasure Islands and Moneyland...recommend them both. Since then I just use the term offshore to encompass any of those hundreds or so possible structures.
mmm_grayons 6y ago
Apple runs what may be the world's largest hedge fund, Braeburn Capital [0], that it uses to invest its cash reserves. But yes, I'm sure a fair amount of it is in foreign bank accounts. https://en.wikipedia.org/wiki/Braeburn_Capital https://en.wikipedia.org/wiki/Braeburn_Capital
markvdb 6y ago
A lot of Apple's non-US profits were/are in Bermuda. See https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement .

chrsstrm 6y ago

Not just that US income tax needs to be paid, but also that cash needs to be converted into USD, which poses a problem in relation to fluctuating rates on currency conversion. Currency conversion rates is a running theme in Apple's SEC filings and was also mentioned in yesterday's call. In fact, there is an entire paragraph in last year's annual report that discusses how they built a model to not just optimize conversion to USD, but also predict the total cost so that they could also hedge against it. There's also a note which says their foreign tax obligations are still under review from 2016 forward, so they might be prevented from moving the money until that picture becomes more clear as to how much is owed.