Apple Lobbies India Over Billions in Potential iPhone Factory Taxes

Apple is actively lobbying the Indian government to change a long-standing tax law. This law could force the company to pay billions in taxes on equipment inside its local iPhone factories. The situation was first reported by Reuters. Negotiations are currently underway.

The core issue involves Apple’s ownership of high-value manufacturing machinery. This equipment is supplied to its partners, Foxconn and Tata. A change in the law is seen as crucial for Apple’s continued expansion in the country.

The Core Conflict in India’s Tax Code

India’s Income Tax Act of 1961 is the source of the problem. It treats Apple’s ownership of factory equipment as a “business connection.” This legal interpretation could make a portion of Apple’s global iPhone profits taxable within India.

The company uses a different model in China. There, Apple buys the specialized assembly machines for its partners. It does not face local corporate tax for this practice. Legal experts point to a 2017 Supreme Court ruling against Formula One as a potential precedent. That case established that control, not just ownership, can create a tax liability.

Broader Impact on Apple’s Supply Chain Strategy

This tax discussion is happening as Apple rapidly grows its Indian operations. The country’s share of global iPhone shipments has surged. It is now believed to be around 25%, a fourfold increase since 2022. India is a critical part of Apple’s strategy to diversify its supply chain away from China.

Foxconn and Tata have made massive investments to support this growth. Together, they have poured over $5 billion into building five large Apple manufacturing facilities. Resolving the tax issue is key to unlocking further investment and solidifying India’s role as a major production hub.

The outcome of Apple’s tax lobbying will have significant consequences for its manufacturing future. A favorable resolution could accelerate its move into India. The ongoing apple india tax dispute remains a pivotal issue for the tech giant’s global strategy.

Info at your fingertips

What specific tax law is Apple challenging?

Apple is seeking changes to the Income Tax Act of 1961. The company wants to ensure that simply owning manufacturing equipment in its partners’ factories does not create a taxable presence.

Why is this tax an issue for Apple in India but not China?

In China, Apple’s practice of owning assembly machinery does not trigger local corporate tax. India’s tax code interprets this ownership differently, potentially exposing Apple’s global profits to taxation.

How much could this cost Apple?

While no exact figure is confirmed, reports suggest the potential tax liability could reach billions of dollars. The final amount would depend on how Indian authorities assess Apple’s local business connection.

How important is India to Apple’s manufacturing?

India is increasingly vital. Its share of global iPhone production has jumped to an estimated 25%. This makes it Apple’s second-largest production hub after China.

Who are Apple’s manufacturing partners in India?

Apple works with Foxconn and Tata Electronics in India. These partners have invested over $5 billion to establish several large-scale iPhone assembly plants.