Apple fined in China over underpaid taxes

Apple China was fined £6.5 million for underpaying taxes, the media have reported on Friday.

According to a report by Cnet, citing Chinese state media agency Xinhua, Minister of Finance ordered Apple to pay 452 million yuan (£46 million) that the company failed to pay in tax in 2013.

Because of that, it also needed to pay a fine of 65 million yuan (£6.5 million), in addition to the tax money owed.

So what exactly happened? According to Xinhua, in 2013, Apple China had improperly listed its revenues – understating them by 8.8 billion yuan (£910,000), and costs – understating those by 3.4 billion yuan (£344,000). It also inflated its posted profits by 5.4 billion yuan (£548,000).

Apple says it is all one big misunderstanding. According to a statement given by an Apple spokesperson to CNBC, the problem lies in "a difference in interpretation of a tax rule," adding that the balance was paid "with interest" and that the company pays "all the taxes we owe wherever we do business."

Apple has big plans for the Chinese market. After the Americas, it is the company's biggest market, and one it focuses a lot of its attention on.

In the company's third quarter earnings the iPhone business grew by more than half, to $31bn (£19.64bn) on 47.5 million shipments. Sales in China more than doubled to $13bn (£8.24bn), over a quarter of Apple’s revenue. The company did not say exactly how many iPhones it sold in China last quarter, but it was an 87 per cent increase on a year earlier.