European Court Upholds Decision for Apple to Pay €13 Billion in Back Taxes to Ireland

The European Court of Justice has recently confirmed the European Commission’s 2016 decision, ordering Apple to pay €13 billion in back taxes to Ireland. This ruling marks the end of an eight-year legal battle between Apple and the European Union (EU) Competition Commission.

Ireland, an EU member since 1973, has long been known for its tax-friendly environment for multinational corporations. Apple was among the first companies to establish its European headquarters in Ireland in the early 1980s, attracted by the country’s lower corporate tax rates and strategic location in Western Europe.

The EU Commission launched an investigation into Apple’s tax liabilities in Ireland, uncovering that:

• Apple received preferential tax treatment not offered to other companies.
• The company’s effective tax rate on European profits was as low as 0.005% in 2014, compared to Ireland’s standard corporate tax rate of 12.5%.

In 2016, the EU Commission issued a tax order requiring Apple to repay €13 billion in back taxes to the Irish government. Both Apple and the Irish government appealed the decision, with Ireland arguing that it did not offer preferential treatment to any company operating within its borders. However, the European Court of Justice has now ruled in favor of the EU Commission, confirming that Apple’s tax arrangements amounted to illegal state aid. The court found that Ireland had granted Apple a selective tax advantage that distorted competition within the EU.

This judgment has significant implications for the future of corporate taxation within the EU. Although the case represents the effects of tax scrutiny on large multinational enterprises like Apple, smaller firms could also be affected by this type of ruling.

Reach out to McGuire Sponsel’s Global Business Services team with questions on this court case or any other international tax issue.