Apple Ordered To Pay Ireland €13bn In Taxes

Apple CEO Tim Cook has been handed some unpleasant news in Europe, just a day after his firm had revealed its iPhone 16 handsets to the world.

The Court of Justice of the European Union (CJEU) on Tuesday ordered Apple to pay Ireland €13bn (£11bn or $14.4 billion) in unpaid taxes – in a move that ends an eight year battle.

This is the second piece of good news this week for EU antitrust chief Margrethe Vestager, after the same court on Tuesday also dismissed an appeal by Alphabet’s Google against a €2.4 billion (£2bn or $2.65bn) fine for abuse of its comparison shopping service.

Apple state aid

However the Apple case is an involved affair that dates back to the 1990s and early 2000s, and tax decisions made by Ireland, where Apple has its European headquarters.

For years there had been complaints that big name tax firms were avoiding paying their fair share of tax within the European Union, by basing their European headquarters in “low tax” areas such as Ireland and Luxembourg.

The European Commission in 2014 began its investigation of Apple’s tax arrangements in Ireland, and two years later in 2016 concluded that Apple had been able to avoid taxation on almost all profits generated in the EU single market.

In 2016 the European Commission ordered a reluctant Irish government to recover up to 13 billion euros plus interest in “illegal tax benefits”, after it found that two Irish tax rulings had artificially reduced Apple’s tax burden to as low as 0.005 percent in 2014.

Ireland, Apple appeal

But both Apple and the Irish government decided to appeal the fine, and that appeal began in September 2019.

Apple told the EU’s General Court that the EC penalty “defies reality and common sense”.

While Apple and Dublin appealed against the ruling, Apple nevertheless had to hand over the full amount, which Ireland has been holding ever since in an escrow account.

The General Court of the European Union (GCEU) then sided with Apple and the Irish government in July 2020, and rejected the 2016 European Commission order that Apple has to pay 13 billion euros ($14bn) in Irish back taxes.

But European Commission executive VP Margrethe Vestager appealed the General Court’s judgement of July 2020.

In November 2023 the Advocate General Giovanni Pitruzzella for the EU Court of Justice (CJEU) disagreed with the 2020 lower General Court decision.

CJEU ruling

Now the CJEU said it “sets aside the judgement of the General Court concerning tax rulings issued by Ireland in favour of Apple.”

“In 2016, the European Commission found that, by excluding from the tax base the profits generated by the use of intellectual property licences held by ASI and AOE, on the ground, essentially, that the head offices of those companies were located outside Ireland and management of those licences depended on decisions taken at the level of the Apple Group in the United States, the tax rulings had, from 1991 to 2014, conferred on those companies State aid that was unlawful and incompatible with the internal market, and from which the Apple Group as a whole had benefited,” said the CJEU. “The Commission therefore ordered Ireland to recover the aid”

“In 2020, in actions brought before it by Ireland and by ASI and AOE, the General Court annulled the Commission’s decision, ruling that the Commission had been unable to show that there was a selective advantage that arose from the adoption of the tax rulings at issue and resulted in a preferential reduction of the tax base in Ireland.”

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“By its judgement, on appeal by the Commission, the Court of Justice sets aside the judgement of the General Court and gives final judgement in the matter,” it stated. “According to the Court of Justice, the General Court erred when it ruled that the Commission had not proved sufficiently that the intellectual property licences held by ASI and AOE and related profits, generated by sales of Apple products outside the United States, should have been allocated, for tax purposes, to the Irish branches.”

“After setting aside the judgement under appeal, the Court of Justice considers that the state of the proceedings is such that it may give final judgement in the actions, and that it should do so within the limits of the matter before it,” said the court. “In that context, the Court confirms in particular the Commission’s approach according to which, under the relevant provision of Irish law relating to the calculation of tax payable by non-resident companies, the activities of the branches of ASI and AOE in Ireland had to be compared not to activities of other Apple Group companies, for example a parent company in the United States, but to those of other entities of those companies, particularly their head offices outside Ireland.”

The ruling is final and cannot be appealed.

Ireland, Apple reaction

The Irish government has reportedly said it would respect the ruling.

Apple said it paid $577 million in tax, 12.5 percent of the profit generated in the country, in line with the tax laws in Ireland in the period 2003-2014 covered in the EU investigation.

It also told Reuters that it was disappointed with the ruling.

“The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the US,” Apple reportedly said.