Apple’s Tax Law Concerns in India
Apple is reportedly lobbying India’s government to modify income tax regulations that could potentially impose billions of dollars in additional taxes on its iPhone manufacturing operations, according to Reuters sources familiar with the matter. The technology giant’s lobbying efforts come as it expands its manufacturing presence in India while diversifying beyond China.
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Manufacturing Expansion and Tax Hurdles
Sources indicate that Apple’s primary concern involves a 1961 Indian Income tax law that considers foreign ownership of equipment used in India as a “business connection,” making the company’s iPhone profits liable for Indian taxes. This presents a significant challenge to Apple’s current business model, where the company typically procures expensive manufacturing machinery and provides it to its contract manufacturers.
According to the report, Apple executives have held multiple discussions with Indian officials in recent months, arguing that the current legislation could hinder the company’s future expansion plans in the country. Analysts suggest that specialized equipment for iPhone assembly can cost billions of dollars, and contract manufacturers may be unwilling or unable to make such substantial investments.
India’s Growing Importance in Apple’s Strategy
The push for tax law changes coincides with Apple’s growing presence in India, which has become increasingly important to the company’s manufacturing diversification strategy. Counterpoint Research analysis cited in the report shows that iPhone’s market share in India has doubled to 8% since 2022, while India’s share of global iPhone shipments has quadrupled to 25% during the same period.
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Contract manufacturers Foxconn and Tata have reportedly invested more than $5 billion in establishing Apple manufacturing facilities in India, with five plants currently operational. Customs data referenced in the report shows Foxconn alone shipped $7.4 billion worth of products from India by August this year.
Government’s Cautious Stance
Indian officials are reportedly carefully reviewing Apple’s request, balancing the need for foreign investment against concerns about diminishing the country’s sovereign right to tax foreign companies. A senior Indian official quoted in the report stated that “discussions on taxation rules impacting Apple are ongoing,” but emphasized that “it’s a tough call” for the government.
The report states that India’s smartphone manufacturing initiative is a key component of Prime Minister Narendra Modi’s economic agenda. However, officials privately worry that countries like China and Vietnam could race ahead as major smartphone export hubs due to their lower tariffs on phone components.
Legal Precedents and Industry Support
Tax experts cited in the report point to a 2017 Supreme Court case involving UK-based Formula One as a relevant precedent. The court ruled that even though F1 didn’t own the racing circuit near New Delhi, it was liable to pay tax on profits during days when it exerted full control during its Grand Prix event.
The India Cellular & Electronics Association (ICEA), which supports Apple’s position, has reportedly made confidential representations to the government calling for changes to the law. The industry body stated that tax certainty is “paramount for businesses seeking to expand and scale” their operations in India.
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