Apple ordered to pay Ireland $21bn in tax by EU

Europe’s highest court on Tuesday ruled that the money, which has been sitting in an escrow account for the past six years, must be collected from the tech giant.

The European Court of Justice today threw out the judgment of the lower General Court, which overturned the Commission’s original finding in 2016, and found that Ireland was in breach of State Aid rules, The Irish Sunreports.

The European Commission ruled in 2016 that Apple had received unfair tax incentives and had underpaid taxes between 2003 and 2014.

Apple was ordered to pay the $21 billion plus $2 billion in interest into an independent third-party administered escrow account.

And last November, an adviser to the Court of Justice issued a non-binding opinion that the General Court committed a series of errors in law in its ruling.

It was proposed by the Advocate General that the Court of Justice should set aside the judgment of the General Court and refer the case back to the lower court for a new decision.

The Commission found that two separate tax rulings issued by Ireland’s Revenue to Apple in 1991 and 2007 had “substantially and artificially lowered the tax paid by Apple in Ireland since 1991”.

It claimed that two companies based and taxed in Ireland, Apple Sales International and Apple Operations Europe were actually managed from outside of Ireland and were responsible for all sales outside of America.

Ireland and Apple contested the decision, with Apple claiming that it paid its taxes in full but that they weren’t necessarily owed where the EU thought, and in 2020 the EU’s General Court ruled in their favour.

The Court of Justice found today that it erred when it ruled that the Commission had not proved sufficiently that the intellectual property licenses held by two Apple companies and related profits generated by sales outside the United States should have been allocated for tax purposes to the Irish branches.

A spokesperson for Apple said it was “disappointed with today’s decision”, noting that the General Court previously “reviewed the facts and categorically annulled this case”.

The spokesperson said: “This case has never been about how much tax we pay, but which government we are required to pay it to.

“We always pay all the taxes we owe wherever we operate and there has never been a special deal.

“Apple is proud to be an engine of growth and innovation across Europe and around the world, and to consistently be one of the largest taxpayers in the world.

“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.

“We are disappointed with today’s decision as previously the General Court reviewed the facts and categorically annulled this case.”

‘BLOW TO IRELAND’

Peter Vale, Tax Partner at Grant Thornton Ireland, said the verdict is a “blow to Ireland” and “fuels those” who “accuse Ireland of having a tax haven status”.

He said: “As a result of this binding ruling, which overturns the 2020 General Court verdict, Apple must pay over $21 billion in taxes to the Irish Exchequer.

“This money is currently sitting in escrow. It’s possible that ultimately some of this tax will be allocated to other jurisdictions.

“Today’s decision is a blow to Ireland. It had been expected, at worst, that the case would have been sent back to the General Court for a second hearing.

“Many had even expected that the ECJ would have gone against the Advocate General opinion issued in November 2023, bringing closure to the case in favour of Apple and Ireland. Few had expected the decision, which also brings closure to the case but which is potentially damaging from a reputational perspective.”

He continued: “Of course this case relates to a very different era; tax legislation everywhere has been significantly overhauled since then.

“There is also the point that it was nuances of the US tax system that facilitated many of the structures that have long since been closed down.

“However ‘if you’re explaining you’re losing’ and today’s decision will further fuel those that continue to accuse Ireland of having tax haven status.“While both Apple and Ireland vigorously defended the European Commission assessments from the outset, there is no question that Ireland’s reputation suffered as a result of the ongoing case.”

This article appeared in The Irish Sun and was reproduced with permission.