Apple Saves $9.2 Billion in US Taxes with Bond Offering Deal

Recently, Apple announced in an official report that the company has started offering $17 Billion in bonds. The respective amount of money represented the largest debt the company experienced since 1992. Now, the bond offering deal will allow the Fruit Company to save more than $9.2 Billion in US taxes.

The bond deal was constructed to finance the stock buyback, and in this way, Apple avoids paying $9.2 billion in taxes to the U.S government.

Apple's debt offering

Despite the fact that the Cupertino-based company has more than $150 Billion in cash and investment, the company avoids storing the amount of money on the U.S. territory in order to avoid paying taxes for them. Therefore, Apple’s cash is held overseas where the taxes are lower. When returning the cash to U.S. in order to buy back shares and issue a dividend. Apple will be required to pay for repatriation taxes. Currently, Apple own more than $100 Billion in cash, which are stored overseas.

The borrowing strategy performed by the Fruit Company will allow them to save up to $9.2 billion, amount that was required for paying taxes according to the government of the United States.

Last week, the big Cupertino-based company, declared the fact that the company is planning to spend more than $100 billion in cash by the end of the 2015 on its capital return program. A part of this amount of money will involve a 15 percent increase in dividend payouts while the rest of the money will go toward a share repurchase program. Apparently, this will be the largest repurchase ever planned for a manufacturer company.

However, despite its enormous cash reserves, Apple still decided to borrow the money required for its capital return program. As it was stated before, Apple sold $17 billion in debt which was the first bond offering since 1990s. At this time, Apple exceeded Microsoft’s bond offering program and became a dollar amount record for a U.S. corporate offering.

As the year of 2012 is concerned, Apple paid $6 billion in federal corporate income taxes for the previous fiscal year. Because of this, Apple is considered to be one of the largest, if not the largest, corporate income taxpayers in the country.

Apple’s CFO Peter Oppenheimer declared during the quarterly earning conference call last year the fact that the capital structure will allow the company to attract priced capital, which would “reduce Apple’s overall cost of capital, and would be an efficient use of the company’s balance sheet.”

Since the stock has dropped 36 percent from September record, the Company needs to find out something impressive and extraordinary such as a new iPhone or iPad in order to maintain a top position.

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