Apple Lobbying India to Change Tax Law

Apple is lobbying India to amend a decades-old tax law that could expose the company to billions of dollars in taxes on equipment it owns inside local iPhone factories, Reuters reports.

Apple is reportedly urging the Indian government to modify provisions in the Income Tax Act of 1961 to ensure it is not taxed simply for owning high-value manufacturing machinery supplied to its contract manufacturers, including Foxconn and Tata Electronics. The issue is a potential obstacle to Apple's expansion in the country.

Indian law currently treats such ownership as creating a "business connection", effectively making the company's global ‌iPhone‌ profits taxable in India. In China, Apple operates under a different model. The company buys the specialized machinery required to assemble iPhones and provides it to its manufacturing partners without becoming liable for local corporate tax. In India, the same practice could trigger significant tax exposure under existing law.

Legal experts say India's stance may stem from precedents such as the 2017 Supreme Court ruling against Formula One, which held that the UK-based company was liable for local taxes during its Grand Prix event because it exercised control over the circuit despite not owning it. A similar interpretation could apply if Apple were to maintain ownership of machinery used in Indian factories.

Discussions with the Indian government on taxation rules impacting Apple are said to be ongoing. The effort comes amid rapid expansion of its Indian operations. Since 2022, the country's share of global ‌iPhone‌ shipments is believed to have increased fourfold to around 25%. While China still produces around 75% of all iPhones, India is increasingly viewed as a critical secondary hub as Apple diversifies its supply chain. Foxconn and Tata have together invested more than $5 billion to open five large manufacturing facilities for Apple in the country.

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