The Indian government approved a measure on Sunday that allows Apple to directly finance iPhone manufacturing equipment in India without risking additional taxes. Here are the details.
Apple scores favorable tax law revision
As reported by Reuters, the Indian government has approved changes to its income tax rules allowing foreign companies to provide manufacturing equipment to local contract manufacturers without triggering tax liabilities.
Apple had reportedly been campaigning for changes to the law, amid concerns that directly funding high-end iPhone manufacturing machinery in India could expose it to taxes on its local profits, even if production was handled entirely by third-party contract manufacturers.
With the new measure, Apple can now finance equipment for its contract manufacturers in certain export-focused zones for up to 5 years without incurring additional tax risk, effectively lowering barriers to scaling iPhone production in the country.
From Reuters:
Apple had been lobbying India’s government to modify its income tax laws to ensure the company is not taxed for ownership of the high-end iPhone machinery it provides to its contract manufacturers.
In India, unlike China, Apple was concerned that if it paid for machines for its contract manufacturers, Indian law could consider that a so-called “business connection” and impose taxes on its iPhone sales profits. That had forced its contract manufacturers Foxconn (2317.TW), opens new tab and Tata to themselves spend billions of dollars on machines.
Revenue Secretary Arvind Shrivastava confirmed the change, stating that “if you bring your machine, and that machine is used by a local manufacturer to produce something, we will … exempt you for 5 years,” per Reuters’ report.
9to5Mac’s take
The news comes as Apple navigates a delicate regulatory environment in India.
At the same time that the company has been steadily increasing its retail and manufacturing footprint in the country, it has also found itself under multiple regulatory scrutiny efforts, including an ongoing antitrust investigation and privacy-threatening government proposals.
Be that as it may, it looks like Apple has just secured an important win in its quest to keep diversifying away from Chinese manufacturing, alongside its increasingly fruitful investment in the Indian market.
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