Apple (Nasdaq: AAPL) is under investigation by authorities in Italy for alleged tax fraud, according to local reports. The government suspects Apple may have underreported more than 1 billion euros ($1.3 billion) to the Italian tax authority.
The dispute in question centers around how profits made by products sold in Italy. Apple makes profits in Ireland from its sales into Italy which are not taxed in Italy because the law does not require it. However, Italian authorities are now stating that these should be considered as profits made in Italy and thus subject to Italian tax.
A judicial source "with direct knowledge" confirmed local media reports of Apple's investigation, reported Reuters on Wednesday, Nov. 13.
Italy's tax laws are known to be aggressive, especially in recent years after several multinational corporations have been accused of evading paying tax in the country. In June, fashion designers Domenico Dolce and Stefano Gabbana were handed a 20-month suspended prison sentence and fined for hiding hundreds of millions of euros in unpaid taxes. Both deny any wrongdoing.
This isn't the first time Apple has come under scrutiny in Italy. In 2011, Apple was fined $1.2 million after the Italy's Competition and Market Authority found that Apple was not providing customers with information about the two years of free product warranty that is required under Italian law. Instead of telling customers about the free warranty, Apple pushed the sale of their warranty policy, AppleCare, which can cost customers up to $349 per device.
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