Apple wins on tax, but not patents

THE US Republican tax overhaul passed by Congress this week will allow Apple Inc to bring back its $US252.3 billion ($A329.2 billion) foreign cash pile without a major tax hit - a long-standing company goal.

Other provisions of the bill, namely the cut in the company tax rate from 35 per cent to 21 per cent, are also a big boon for Apple.

But not everything went the company’s way. A critical difference between the Senate version of the bill and the final version could actually raise the amount of cash taxes that Apple pays on profits from patents held abroad.

The treatment of foreign patent profits is important to Apple because shifting those profits overseas was a cornerstone of its tax practices for decades. In effect, the company attributes a large portion of the value of its products to patents and other intellectual property such as trademarks. Apple then parks that IP in countries with low tax rates and assesses substantial patent royalties on all of its sales, which then flow back to the low-tax locations like Ireland.