Apple has to pay € 13B in taxes to Ireland, plus interest

After a legal battle that lasted over eight years, the European Court of Justice has decided that Apple had received unlawful tax advantages for years from Ireland.

From 1991 to 2014, Apple and Ireland had mutual agreements on the amount of tax which Apple had to pay. In that period, Ireland issued two tax rulings in favor of Apple, which in practice meant the United States tech company hardly paid any taxes.

Simply put, Apple incorporated two companies -Apple Sales International (ASI) and Apple Operations Europe (AOE)- in Ireland, but the companies only existed on paper. Thanks to the tax rulings, Apple was able to lower their chargeable profits in Ireland, thus hardly paying any taxes over its profits.

Thanks to this construction, Apple paid just 1 percent tax on its profits outside the United States in 2003. By 2014, it had dropped to 0.005 percent.

In 2016, the European Commission argued that this gave Apple an unfair advantage over other companies and therefore amounted to illegal state aid. The Commission ordered Ireland to recover the illegal tax benefits of approximately € 13 billion it gave to Apple.

In 2020, the General Court annulled the European Commission’s decision. According to the court, the Commission had failed to prove that Apple had been favored by Ireland, meaning that Apple didn’t have to repay a dime.

Tuesday, the European Court of Justice set aside the judgment of the General Court and gave its final ruling in the matter.

“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,” the ruling says.

In other words, the European Court of Justice determined that Apple has to pay € 13 billion to compensate for all illegal tax benefits the company received between 1991 and 2014, plus interest.

Executive Vice-President Margrethe Vestager calls the ruling “a big win for European citizens and for tax justice”.

“Today marks a step forward. And it's encouraging. It is encouraging for us to do more. The Commission will continue its work on harmful tax competition and aggressive tax planning. Both in terms of legislative proposals and enforcement,” she said in a speech.

Apple claims it handled in line with the tax laws in Ireland at the time and paid over $ 577 million in taxes.

“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 U.S.,” a spokesperson told Reuters.