The European Court of Justice has ordered Apple to pay back €13 billion ($14.4 billion) worth of tax to Ireland. Two of its subsidiaries illegally received tax benefits between 1991 and 2014, as these benefits were not available to other companies.
Ireland issued tax rulings favouring Apple Sales International and Apple Operations Europe in 1991 and 2007, respectively. Both companies were incorporated in Ireland but were not tax residents. The rulings allowed them to calculate their taxable profits in the country based only on the activities of the Irish branches.
However, because their head offices were outside Ireland and decisions related to the intellectual property licences were made in the U.S., the rulings meant that profits generated by the companies’ IP licences were excluded from their tax base.
Other Irish companies could not benefit from the same rulings. Apple paid a corporation tax rate of 0.0005% in 2014, while Ireland’s headline rate has been 12.5% since 2003.
“Ireland granted Apple unlawful aid which Ireland is required to recover,” judges said in a press release.
The European Commissioner for Competition, Margrethe Vestager, ordered Apple to pay back the taxes linked to their IP licences in 2016. CEO Tim Cook called the claims “total political crap” at the time.
However, the General Court of the European Union annulled the order in 2020, stating that “the Commission had not sufficiently established that those companies enjoyed a selective advantage.”
On Tuesday, the ECJ set aside the General Court’s ruling. It said that the Commission had sufficiently proven that Apple had been given an advantage and had not misinterpreted Irish law. The ECJ also said that the General Court had wrongly upheld complaints from Ireland, ASI, and AOE regarding the Commission’s assessment.
Vestager celebrated the ECJ’s ruling as a win for European citizens and tax justice. She stated that the tax rulings attributed the bulk of the taxable profits to two Irish subsidiaries of Apple with a stateless head office, which existed only on paper.
Apple, which claims it paid $577 million in tax between 2003 and 2014, expressed disappointment with the decision. The company maintains that it did not have a special deal with Ireland and that its income was already subject to taxes in the U.S.
The ruling by the ECJ also impacted the unveiling of Apple’s new tech lineup on Sept. 9. This included the iPhone 16, Apple Watch Series 10, and AirPods 4.
The Irish government has one of the lowest corporate tax rates in the EU at 12.5%. This makes it a popular choice for tech companies’ European headquarters. Apple’s base for Europe, the Middle East, and Africa is in Cork, while Meta’s is in Dublin.
Google’s parent company, Alphabet, also had a €2.42 billion antitrust fine upheld by the ECJ on the same day. The fine was imposed by the European Commission in 2017 for abusing its dominant position in online search markets. Google has faced multiple antitrust fines in the EU, totaling €8.25 billion during Vestager’s tenure.
The European Commission also told Google that a “mandatory divestment” of part of its ad tech business would be the only way to address its competition concerns. Google is facing scrutiny not only in the EU but also from other regulatory bodies around the world.
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