Apple is under investigation in Italy over allegations of profit shifting around a number of its annual tax returns covering €1bn (£840m) of income over a two-year period.
The inquiry, which centres on the company's Italian subsidiary, concerns €206m (£172m) of taxable income in 2010 and €850m (£713m) of taxable income in 2011.
According to the Italian press, Apple's Milan headquarters have been raided and a substantial batch of computer equipment and telephone records seized. The profits made by Apple in Italy were recorded by Apple Sales International, which is registered in Ireland, and the Italian authorities are arguing that the Italian subsidiary was not a satellite office run from Dublin, but was directly responsible for the business carried out in Italy.
Luigi Macioce, tax partner with law firm Withers in Milan said: 'A sophisticated guess leads one to suspect that Apple is going to find itself the new victim of Italy's abuse of rights doctrine, which is strongly supported by the Italian tax authorities and often upheld by the Italian courts.
'The overall aim of the doctrine is to target "unfair" tax savings and has led to a very uncertain business environment in Italy. The tax courts have failed to treat the same cases alike, with the consequence that any tax planning structure - even the most grounded and economically sound ones - is potentially endangered.'
Apple has attracted considerable criticism in the UK over its use of the so-called 'double Irish' tax arrangement. This involves establishing an IP holding company in Ireland that is tax resident in an offshore country, and an operating subsidiary in Ireland which manages global sales, paying royalties to the holding company. The European subsidiaries of the group buy products from the Irish operating company, leaving them with a very low margin and taxable profit.
A spokesperson for Apple said: 'Apple pays every dollar and euro it owes in taxes and we are continuously audited by governments around the world. The Italian tax authorities already audited Apple Italy in 2007, 2008 and 2009 and confirmed that we were in full compliance with the OECD documentation and transparency requirements. We are confident the current review will reach the same conclusion.'
