The fine is being directed to an iTunes unit in Japan and, according to reports, the unit has paid the amount it was fined, although it is not clear exactly when Apple paid the fine.
So how did Apple initially underreport its income? According to the Tokyo Regional Taxation Bureau, the company was sending portions of its profits to a unit located in Ireland, where it did not pay taxes on the international transaction. According to local news outlet Yomiuri Shimbun, iTunes Japan has to pay a withholding tax rate of 20.42 percent on any royalties that are paid to a foreign country.
Apple is coming under more and more scrutiny over its tax practices. As mentioned, Ireland has been ordered by the European Commission to collect a massive $14.5 billion from Apple, which reportedly had unfair agreements with the Irish government. Apple and Ireland both plan on appealing that decision, saying that the tax treatment falls in line with European Union law, but it does not undo how much scrutiny Apple is under.
“This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals,” the company wrote in a letter to customers. “We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.”
While the $118 million is a slap in the face for Apple, it is nothing the company will be seriously worried about — the company reported $234 billion in revenue during 2015, a figure that it is likely to at least come close to matching for 2016 considering the recent success of the iPhone 7 and the Apple Watch Series 2.
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