According to newly leaked documents, in recent years, Apple used a Bermuda-based law firm to take advantage of highly advantageous (though legal) tax arrangements in Jersey to mitigate its tax burden as much as possible.

The so-called Paradise Papers, which were leaked to the International Consortium of Investigative Journalists , show that as the so-called "Double Irish" tax loophole began to close , Apple began shopping for a new place to park its hundreds of billions in offshore cash.

As one of the world’s largest corporations, Apple's tax practices have been scrutinized in recent years. Under American law, companies must pay a 35-percent corporate tax rate on global profits when that money is brought home—so there is an incentive to keep as much of that money overseas as possible. Also, due to various tax law exemptions or loopholes, large multinational companies typically do not pay the full 35 percent.

In 2013, a Senate report found that "Apple, over a four-year period from 2009 to 2012... defer[red] paying US taxes on $44 billion of offshore income, or more than $10 billion of offshore income per year. As a result, Apple has continued to build up its offshore cash holdings which now exceed $102 billion."

The same report concluded: "Apple has exploited a difference between Irish and US tax residency rules."

According to a recent report by the Institute on Taxation and Economic Policy, under a newly proposed Republican tax plan that would allow for a one-time tax holiday to encourage companies to bring money home, Apple would be the single largest corporate beneficiary.

Ultra-low tax rates

But recently, according to the ICIJ, Apple employed an American law firm, Baker McKenzie, which in turn contacted an offshore specialist firm in Bermuda, known as Appleby. In 2014, Baker McKenzie e-mailed Appleby offices in various tax havens, including Jersey, a British dependency in the English Channel with a population of about 100,000.

One message asked that the offices: "Confirm that an Irish company can conduct management activities... without being subject to taxation in your jurisdiction."

Apple also reportedly asked for assurances that the local political climate would remain friendly: "Are there any developments suggesting that the law may change in an unfavorable way in the foreseeable future?"

The ICIJ did not publish the full cache of documents that it received. As the ICIJ also noted, Jersey charges no corporate taxes for most companies. Two of Apple's three subsidiaries in Ireland were then declared "resident" in Jersey. The third company, Apple Operations Europe, remains a tax resident in Ireland.

Apple, the ICIJ concluded, "has continued to enjoy ultra-low tax rates on most of its profits and now holds much of its non-US earnings in a $252 billion mountain of cash offshore. The Irish government's crackdown on shadow companies, meanwhile, has had little effect."

Omri Marian, a tax law professor at the University of California, Irvine, told Ars that the leaks show Apple has nearly unprecedented corporate power.

"Apple is so big that it is effectively able to negotiate its own tax laws," he e-mailed. "If one jurisdiction doesn't come through for them (Ireland), they'll just find another that will (Jersey)."

“Every dollar”

Samuel Brunson, a tax law professor at Loyola University Chicago, told Ars that the "offshore" notion is a bit of a misnomer, as it simply means that the money remains untaxed until it is "returned" to the American corporate parent.

"Keeping money offshore very clearly doesn't mean the US parent doesn’t have access to it," he e-mailed. "They have to jump through hoops to ensure that it remains untaxed, but they can effectively lend the money or otherwise access it."

A recent episode of NPR's Planet Money pointed out that much of this money may be already sitting in American banks. (Apple told the Senate as much in 2013: "the assets themselves are held in bank accounts in New York.")

In a lengthy corporate statement posted Monday, Apple wrote that, as the world's largest taxpayer, it "pays every dollar it owes in every country around the world."

The company went on, noting that "the changes Apple made to its corporate structure in 2015 were specially designed to preserve its tax payments to the United States, not to reduce its taxes anywhere else. No operations or investments were moved from Ireland."

Apple concluded:

When Ireland changed its tax laws in 2015, Apple made changes to its corporate structure to comply. Since then, all of Apple's Irish operations have been conducted through Irish resident companies. Apple pays tax at Ireland's statutory 12.5 percent. As part of these changes, Apple's subsidiary which holds overseas cash became resident in the UK Crown dependency of Jersey, specifically to ensure that tax obligations and payments to the US were not reduced. Since then, Apple has paid billions of dollars in US tax on the investment income of this subsidiary. There was no tax benefit for Apple from this change and, importantly, this did not reduce Apple's tax payments or tax liability in any country.

Apple did not immediately respond to Ars' specific questions.

Samuel Brunson, the law professor, also noted that Apple's statement is "probably true enough... But it's kind of beside the point: there’s not a clean line between legal and illegal in the tax world," he wrote. "While some things are clearly illegal, the better question is how aggressive is a tax position. I don't know Apple's tax strategies intimately, but they strike me as pretty aggressive... They're probably not breaking tax laws, but they're pushing up against the limits of propriety and perhaps of legality."