Apple must pay back 13 billion euros in unpaid taxes to Ireland, EU court rules

The European Court of Justice has ordered Apple to pay back €13 billion ($14.4 billion) in taxes to Ireland after two of its subsidiaries illegally received tax benefits between 1991 and 2014 that were not available to other companies.

Ireland issued tax rulings in favour of Apple Sales International and Apple Operations Europe in 1991 and 2007 respectively. Both companies were incorporated in Ireland but were not tax residents. These rulings allowed them to calculate their taxable profits in the country based only on the activities of the Irish branches.

However, because their headquarters were outside Ireland and decisions relating to intellectual property licensing were made in the US, these decisions meant that the profits the companies earned from licensing IP were excluded from their tax base.

Other Irish companies will not be able to benefit from this same decision. Apple paid corporate taxes at a rate of 0.0005% in 2014While Ireland’s main rate has been 12.5% ​​since 2003.

“Ireland has provided unlawful assistance to Apple, which Ireland must withdraw,” the judges said in a ruling. Press release,

Vestager reacts to the Apple news

European Competition Commissioner Margrethe Vestager had already ordered in 2016 that Apple pay taxes related to its IP licenses, saying the tax rulings were illegal. At the time, CEO Tim Cook dismissed these claims as “complete political nonsense”.

However, this order was annulled in 2020 by the EU’s General Court – a lower court than the ECJ – because “the Commission had not sufficiently established that those companies enjoyed a selective advantage.”

SEE ALSO: Apple allows EU users to delete pre-installed apps on iOS 18 in compliance with Digital Markets Act

On Tuesday, the ECJ annulled the General Court’s decision. It said the Commission had sufficiently proven before the General Court that Apple had been given an advantage and that it had not misinterpreted Irish law. The ECJ also said the General Court had wrongly upheld the complaints of Ireland, ASI and AOE regarding the Commission’s assessment.

Upon hearing the news of the E.C.J.’s much-anticipated decision, Vestager Posted on X“Today is a huge victory for European citizens and tax justice.”

one of Press Conference Following the decision, he said, “These tax decisions transferred the bulk of taxable profits to Apple’s two Irish subsidiaries, which were stateless headquarters. These headquarters existed only on paper – no desks, no chairs, no activity. Thus the profits were not taxed anywhere.”

Apple says it paid $577 million in taxes between 2003 and 2014 – representing 12.5% ​​of the profits it made in Ireland – and said it “never had a special deal” with Ireland BBC,

It added: “The European Commission is trying to change the rules with retrospective effect and ignoring that, as required by international tax law, our income was already subject to taxes in the US. We are disappointed by today’s ruling, as the General Court had previously reviewed the facts and clearly dismissed the case.”

The decision also impacts the unveiling of Apple’s new tech lineup, including the iPhone 16, Apple Watch Series 10, and AirPods 4, on September 9.

SEE ALSO: iPhone 16 cheat sheet: Key features, price, hacks and more

ECJ decision called ‘dramatic’

The Irish government’s corporate tax rates are among the lowest in the European Union at 12.5%, making it a popular choice for tech companies’ European headquarters. Apple’s headquarters for Europe, the Middle East and Africa are located in Cork, while Meta’s are in Dublin.

Ireland Appeals were made According to the European Commission’s 2016 ruling, “there was no activity relating to intellectual property in Ireland,” so profits were not attributable to Apple’s Irish branches. It has also claimed that its treatment of IP taxation is in line with other members of the Organisation for Economic Co-operation and Development, according to Reuters,

Alex Haffner, competition partner at Fladgate, told TechRepublic via email: “The ECJ’s decision is dramatic, as it overturns the findings of the EU’s subordinate General Court, which had upheld Apple’s appeal against the Commission’s findings that it had received illegal state aid through tax benefits granted by the Irish government.

“In summary, the ECJ has found that the General Court took too literal an approach when it decided that the Commission had not shown to the requisite standard that Apple’s revenues outside the US should be attributed to Ireland and taxed at an appropriate level. Instead, the ECJ was prepared to look at the substance of the situation and whether, overall, Apple was being treated more favourably by the Irish government than it should have been.”

“From a financial perspective, Apple will now have to pay the 13 billion euros that are held in escrow pending the outcome of the case. But perhaps more relevant will be that, again, EU authorities and courts are prepared to show their (collective) strength to regulate Big Tech where necessary.”

On June 24, Apple became the first technology giant to be formally accused by the European Commission of violating the Digital Markets Act.

The Commission found that Apple has three sets of business rules that ultimately prevent iOS app developers from directing their users to third-party purchase options. This goes against the DMA, which states that developers should be able to easily and free of charge direct their customers to purchase options outside of the App Store.

Apple took several steps in January to comply with the DMA, including changing its payment system for app sellers in the EU and ending its App Store hold on iOS app distribution in the EU. It also began prompting iOS users in the EU to choose a preferred browser instead of defaulting to Safari. Still, it €1.84 billion fine To impose anti-steering provisions on music streaming apps in March.

Google’s appeal against a €2.42 billion antitrust fine has also been rejected by the ECJ

Apple wasn’t the only target of the ECJ on Tuesday: it also upheld the 2.42 billion euro anti-competition fine imposed against Google’s parent company Alphabet, confirming an earlier ruling by the General Court.

The fine was imposed by the European Commission in 2017 after Google was found to have abused its dominant position in online search markets by preferring its own comparison shopping service over its European rivals.

“Google’s conduct was discriminatory and did not fall within the ambit of competition,” the ECJ said in its ruling. Press release,

Vestager called the decision a “major victory for digital fairness”. Post to XGoogle told the BBC it was disappointed by the decision and had made changes in 2017 to comply with the Commission’s directions.

Google has faced a total of €8.25 billion in EU antitrust fines during Vestager’s tenure as commissioner. The €4 billion fine for forcing Android device makers to pre-install Google Search and Chrome in 2018 was the largest in EU antitrust history.

The European Commission also told Google that “Compulsory Disinvestment” In March, the company expressed a preliminary opinion that it had violated EU anti-competition rules, and that selling a portion of its ad tech business would be the only way for the company to address its competition concerns.

The EU is continuing to investigate the way Google complies with the new Digital Markets Act. Regulators say it is promoting its own services above third-party services in search results and is therefore “gatekeeping”.

In March, Google temporarily removed some search widgets. like google flightsThe move has been taken to allow greater access to individual businesses after the implementation of the DMA.

See: Microsoft accused of violating EU antitrust rules by bundling Teams with other Office products

But it’s not just the EU that has questioned Google’s ad tech practices. Last week, the UK’s Competition and Markets Authority provisionally ruled that Google’s dominance in the ad tech market is harmful to competitors and could result in Google being fined up to 10% of its global annual turnover.

Google intends to appeal a U.K. court ruling in June that allowed a lawsuit by Ad Tech Collective Action LLP to proceed to trial. The group of online publishers alleges Google abused its dominant position in the digital advertising technology sector, causing it to lose 13.6 billion pounds.

US Department of Justice and State Attorneys General An antitrust investigation was launched in 2020The suit alleges that Google “illegally used distribution agreements to thwart competition.” That investigation is still ongoing.

A federal judge ruled in August that the technology company had a monopoly on general search services and text advertising and had violated anticompetition law.