UPDATED 13:11 EDT / JULY 15 2020

POLICY

Apple lands key victory in $15B tax case over Irish subsidiaries

A European Union court today ruled that Apple Inc. doesn’t have to pay 13 billion euros, or about $15 billion, in back taxes it was ordered to cough up under a 2016 regulatory decision.

Apple until a few years ago collected much of the revenue it made in the EU through a pair of Ireland-based subsidiaries. As a result, the company was taxed in Ireland on those sales, paying an effective tax rate of one percent or less from 2003 to 2014. The European Commission, the EU’s executive arm, in 2016 found that Apple’s low effective tax rate amounted to illegal state aid and ordered it to reimburse 13 billion euros with interest.

Today’s ruling from the General Court of the European Union, the bloc’s second-highest court, annuls the European Commission decision. “The Commission was wrong to declare that ASI and AOE had been granted a selective economic advantage and, by extension, State aid,” the court stated. ASI and AOE are Apple Sales International and Apple Operations Europe, the two Ireland-based subsidies the company used to collect EU revenues.

“The Commission did not prove, in its alternative line of reasoning, that the contested tax rulings were the result of discretion exercised by the Irish tax authorities and that, accordingly, ASI and AOE had been granted a selective advantage,” the judges found.

Apple unsurprisingly reacted positively to the decision. “We thank the General Court for their time and consideration of the facts. We are pleased they have annulled the Commission’s case,” a spokesperson said. The iPhone maker used the opportunity to point out that it’s the world’s largest taxpayer, noting the $100 billion in corporate income taxes it has paid globally over the last decade.

“We will carefully study the judgment and reflect on possible next steps,” European Commission executive vice president Margrethe Vestager said in a statement. “The Commission stands fully behind the objective that all companies should pay their fair share of tax.”

Tech giants’ tax structures have come under scrutiny in recent years, particularly within the EU, as part of the intensifying regulatory focus on Silicon Valley. France and other countries are adopting or considering to adopt special digital levies on the world’s largest internet companies. The Organisation for Economic Cooperation and Development, or OECD, is overseeing a global effort to develop new international rules on taxing tech firms. 

Photo: Unsplash

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