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Apple hit by $118 million tax penalty in Japan

(Image credit: Image Credit: Filipe Frazao / Shutterstock)

Apple has been ordered to pay a $118 million tax penalty in Japan where it failed to correctly report the income earned by the Japanese iTunes unit. This comes after the company was recently ordered to pay a colossal $14.6 billion tax penalty in the European Union (EU) for corporate tax avoidance in Ireland.

Apple has also encountered similar tax related troubles in China where in 2015 it had to pay $71 million. The company countered by saying that it had misinterpreted Chinese law which is why it paid its taxes incorrectly.

The Apple's iTunes unit paid the correct amount that was requested by the Tokyo Regional Taxation Bureau. However since the company sends a portion of the revenue earned from its music business division to its corporate headquarters in Ireland, the fees paid by Japanese subscribers ended up being sent overseas. This unit failed to pay a withholding tax on the earnings in question that were generated in Japan.

Recently the EU has been a strong critic of a number of US companies such as Apple and Starbucks and it has claimed that these multinational corporations actively look to exploit tax loopholes for their own personal gains.

Currently a global effort backed by over 80 countries has begun to combat cross-border tax avoidance which is also known as Base Erosion and Profit Shifting. The EU has set out on its own to target these companies and is highly likely that other multinational corporations will face its wraith in the coming months. 

Image Credit: Filipe Frazao / Shutterstock

Anthony Spadafora
After living and working in South Korea for seven years, Anthony now resides in Houston, Texas where he writes about a variety of technology topics for ITProPortal.