Apple Urges India to Amend Tax Law on Manufacturing Equipment Ownership
Apple is lobbying the Indian government to change a 1961 tax law that treats its ownership of expensive iPhone assembly machinery in India as a 'business connection', potentially subjecting the company to billions in taxes on global profits. This tax treatment differs from China, where Apple owns such equipment without tax liability. Apple aims to expand iPhone manufacturing in India but sees the current tax rules as a major barrier to growth.
Apple is actively engaging with the Indian government to amend provisions in the Income Tax Act of 1961 that currently classify Apple's ownership of specialized iPhone assembly equipment used by its contract manufacturers in India as a 'business connection.' This classification could trigger significant Indian tax liabilities on Apple's global iPhone profits, potentially amounting to billions of dollars. Unlike China, where Apple owns similar machinery at its manufacturing partners’ plants without facing tax consequences, the Indian law treats such ownership as creating a taxable presence. Apple's manufacturing footprint in India has been rapidly growing, with contract manufacturers like Foxconn and Tata investing over $5 billion in new facilities, increasing India's share of global iPhone production to approximately 25%. Apple argues that contract manufacturers have limited capacity to finance the costly equipment, making Apple's ownership model critical for further expansion. Indian tax authorities, however, emphasize that non-resident companies earning income through a business connection in India must pay corporate tax, which Apple currently avoids under the existing legal framework. Indian commentators and experts urge that any changes should balance Apple's growth ambitions with India's goal of developing a competitive and value-added manufacturing hub, warning that replicating China's more lenient tax treatment might undermine domestic tax equity and policy goals. These ongoing discussions highlight the complex intersection of global supply chain strategy and local tax policy impacting Apple's ambitions in India.
