Paradise Papers reveal how Apple set up secret offshore structure to avoid billions in taxes

Apple "shopped" for tax haven before moving offshore cash reserves to Jersey. Photo / AP

The Paradise Papers have revealed how Apple set up a secretive new offshore structure to avoid billions in taxes after Ireland cracked down on the corporation.

The company "shopped around" for a tax haven before moving most of its offshore cash reserves to Jersey.

Its two key subsidiaries were managed from the offices of law firm Appleby on the Channel Island from the start of 2015 until early 2016 - meaning Apple would have been able to avoid billions in tax around the world, according to Daily Mail.

Until 2014 it had been exploiting a financial loophole in the US and Ireland known as the "double Irish".

It let Apple funnel its sales through Irish subsidiaries that were effectively stateless meaning it paid as little as 0.005 per cent tax on its European profits in some years.

The amount was a stark contrast to the Irish corporation levy of 12.5 per cent or the US rate of 35 per cent allowing the iPhone manufacturer to keep billions of pounds extra in profits.

But after the EU announced a probe into the tax arrangements in 2013, Apple was forced to find an offshore base that would serve as a tax residency for its subsidiaries in Ireland.

The leaked Paradise Papers revealed that the following year Apple's legal advisers sent documents to law firm Appleby asking for a recommendation on which jurisdiction would be best.

It ultimately chose Jersey which has a 0 per cent corporation tax rate for foreign firms.

In its emails to Appleby, Apple asked whether it would be possible to "obtain an official assurance of tax exemption" in countries such as Bermuda and the British Virgin Islands, the BBC reports.

Concerned about the political climate, it also asked: "Are there any developments suggesting that the law may change in an unfavourable way in the foreseeable future?"

One email sent between senior partners at the law firm said: "For those of you who are not aware, Apple are extremely sensitive concerning publicity.

"They also expect the work that is being done for them only to be discussed amongst personnel who need to know."

Dubbed the "Paradise Papers", the leak is second only to last year's Panama Papers and again exposes how the rich and powerful shield wealth offshore.

Hundreds of individuals and companies reportedly have had their overseas investments exposed by the files, which are also said to reveal that major global companies have exploited offshore schemes to avoid tax.

First obtained by the German newspaper Suddeutsche Zeitung, the documents stem from two offshore service providers and company registries from 19 tax havens, the Guardian reports.

The International Consortium of Investigative Journalists oversaw the project.

Last year Apple was hit with a record £11billion ($20.8b) bill by the European Commission.

The watchdog found the arrangements dating back to the early 1990s were illegal under state aid rules and gave Apple favourable treatment over other businesses.

Competition Commissioner Margrethe Vestager said the maker of iPhones paid just 1 per cent tax on its European profits in 2003 and 0.005 per cent in 2014.

Vestager said Apple was paying just €50 ($83.64) in tax on every €1million ($1.67m) of profit it made in 2014.

At the time a spokesman for the firm said: "Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned."

Ireland tried to fight the EU's decision, fearing it may force out several multinational corporations who have set up shell-companies in the EU state to benefit from its tax rules.

While the competition watchdog slapped the country with a deadline of January 3 this year, Ireland is no closer to raking in the funds and is only expected to have pinpointed the exact amount of aid it dished out to Apple by March 2018.

The Commission took a double swipe at US tech industry by landing Amazon with a bill of about €250m ($418m) in back taxes after ruling that the firm's sweetheart tax deal with Luxembourg broke state aid rules.

Apple has had a base in Ireland since 1980, long before it became the global brand it is today thanks to its iPhones, iPads and App Store.

It employs about 5,500 people in the country, with its biggest operations in Cork.