Following the tax reforms that president Trump signed in the end of December 2017, Apple is bringing back home an astounding $245 billion of its total $269 billion cash fund that has been accumulated offshore.
Latest tax regulations offer corporations a one-time opportunity to repatriate overseas cash at a significantly lower tax rate.
For Apple and other cash holding companies, this rate has come down from 35% to 15.5%, but in cases involving non-liquid assets the repatriation rate might be as low as 8%.
Apple, notorious for keeping 94% of its total $269 billion cash hoard offshore, has always blankly refused to bring it to the US unless the tax system changes. Now by taking up the offer and moving its huge cash pot to the home grounds under the new provisions, Apple is saving about $43 billion in taxes.
After paying out a repatriation tax of $38 billion the corporation will still have tons of cash to play with.
The plans are to invest an additional $4 billion to already promised $1 billion in an innovation fund, build new US data centres, expand Apple’s app business and open a new campus.
All in all, according to the company’s announcement, Apple is intending to create about 20,000 new jobs and invest up to $350 billion in the US economy in the following 5 years.
Yet, even splashing out on such a scale won’t deplete Apple’s riches. There will be plenty of money left to be spent on buying back their own stock, paying out dividends, engaging in acquisitions or even paying down in full or partially its $100 billion long-term debt.
Whatever the plan, now that the company has a lot more cash at its full disposal, the investors will want Apple to use it well, and with predicted increase in returns on capital some will expect bigger dividends.