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Apple's $17 billion bond deal allows it to avoid $9.2 billion tax hit


Yesterday I reported on the clever economics behind Apple's US$17 billion bond deal, specifically pointing out that the interest Apple will owe on each share it repurchases will be less than the dividend it would have otherwise been responsible for.

Going a bit further, Businessweek did some calculations surrounding Apple's $17 billion bond deal and deduced that the company is avoiding a $9.2 billion tax hit by borrowing the money as opposed to using its own cash pile.

Specifically, if Apple wanted to raise $17 billion by using its foreign stash of cash, it would have had to repatriate upwards of $26.15 billion. With a 35 percent corporate tax rate, Apple would have owed about $9.15 billion in taxes to Uncle Sam.

Instead, Businessweek notes that Apple's annual interest payments on its issued bonds will only come out to about $308 million. And again, those payments are tax deductible.

All in all, Apple's structured bond deal appears to be the result of some extremely shrewd financial planning.

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