India’s tax authorities are investigating Apple, Google, and Amazon, over accounting practices, and is considering a $600 million demand for each.
In a similar move to how the US IRS presented Microsoft with a $28.9 billion tax bill in October 2023, India’s Income Tax Department is specifically investigating transfer pricing. This relates to the entirely legal system of assigning or moving profits from a parent company to a subsidiary.
According to India’s October 2023″>The Economic Times, is looking at international transactions and transfer pricing related to multiple ventures ranging across advertising, marketing, and software development.
For Apple, India is more specifically focused on the company’s local subsidiary and its purchase of Apple products for sale in the country.
“While the company has contested that this isn’t an international transaction (and is) hence outside the purview of taxation,” an unspecified source told the publication, “the department contended this to be a deemed international transaction.”
The department found that the taxpayer wasn’t paying any royalty on trading,” continued the source.
Separately, an unspecified tax official said that India had rejected Apple’s claim that this trading is not subject to the country’s taxation laws.
“[In] the case of Apple India, on the expenses related to trading segments, the [Income Tax’ Department has rejected the justification given by the company,” said the official. “This has caused an alleged tax liability running into hundreds of crores.”
In US dollars, each firm could potentially face a tax demand of $600 million.
Reportedly, the investigation by India’s tax authority into Apple, Google, and Amazon, began in 2021. It covers various assessment years, and is also at multiple different stages, including potential litigation.
The tax probe comes as Apple is expanding its manufacturing in India, with the aim of producing five times more iPhone there during the next five years.
Apple’s Indian expansion is now a result of the company wanting to reduce its dependency on China as its single source of manufacturing. However, previously Apple has also assembled the iPhone SE in India specifically to avoid the country’s import taxes.