Apple isn't paying tax on most iTunes revenue outside of North America

No wonder they had $3 billion lying around to buy up Beats.

Apple isn’t paying tax on more than two-thirds of the money iTunes makes outside North America, according to leaked documents. Most of the tech giant’s ­revenues from the sale of music and films outside the US flow to the group’s Luxembourg holding company, iTunes Sàrl, where the money is not taxable.

Tax documents obtained by The Australian Financial Review show that iTunes Sàrl turnover rose from €353 million ($508 million) in 2009 to €2.05 billion in 2013. The Luxembourg company – which is little more than a letterbox – leverages the sales of digital goods through iTunes, and allows Apple to record iTunes sales to people across EMEA as having been sold in Luxembourg, where taxes are kept ultra-low to attract businesses.

Robert Hatta, who helped oversee Apple’s iTunes retail marketing and sales for European markets until 2007, says the company set up in Luxembourg “because of the favorable taxes”. “Downloads are different from tractors or steel because there’s nothing you can touch, so it doesn’t matter if your computer is in France or England,” he told Examiner. “If you’re buying from Luxembourg, it’s a relationship with Luxembourg.”

The tech giant has also created subsidiaries in other low-tax countries like the British Virgin Islands and Ireland, where reportedly pays less than 1% tax on the US holding company of iTunes Sàrl since moving there last December.

The company recently directed its extra spoils toward buying Beats Electronics for $3 billion, which it is now “rebuilding” with plans to relaunch it in 2015 as part of iTunes. If you’ve got the latest OS X Yosemite you may have already noticed that the iTunes logo has changed from blue to Beats’ trademark bright red. [via MusicWeek]

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