A European court has ordered Apple to pay Ireland €13 billion ($14.4 billion) in taxes after two of its subsidiaries illegally received tax breaks between 1991 and 2014 because the benefits were not available to other companies.
Ireland made tax rulings in favor of Apple Sales International and Apple Operations Europe in 1991 and 2007, respectively. Both companies were registered 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 their Irish branches.
However, because their head offices were outside Ireland and decisions relating to intellectual property licences were made in the US, the rulings meant that profits made by the companies from intellectual property licences were excluded from their tax base.
Other Irish companies have not been able to benefit from the same solutions. In 2014, Apple paid a corporate tax rate of 0.0005%.while in Ireland the overall rate since 2003 is 12.5%.
“Ireland has provided Apple with unlawful assistance which Ireland must repay,” the judges said in their ruling. press release.
Vestager and Apple react to news
European Commissioner for Competition, Margrethe Vestagerruled that Apple must pay back taxes related to its intellectual property licenses back in 2016 because the tax rulings were illegal. At the time, CEO Tim Cook called the claims “complete political bullshit.”
However, in 2020, this ruling was overturned by the General Court of the European Union (a lower court than the European Court of Justice) because “the Commission had not sufficiently demonstrated that these companies had enjoyed a selective advantage.”
SEE: Apple to Allow EU Users to Delete Pre-Installed Apps on iOS 18 Under Digital Markets Act
On Tuesday, the European Court of Justice overturned the General Court's decision. It said the Commission had sufficiently demonstrated to the General Court that Apple had benefited and that it had not misinterpreted Irish law. The European Court also said the General Court had wrongly upheld appeals from Ireland, ASI and AOE against the Commission's assessment.
Upon learning of the long-awaited decision of the European Court, Vestager posted on X: “Today is a huge victory for European citizens and tax justice.”
IN press conference After the ruling, she added: “These tax rulings attributed the vast majority of the taxable profits of Apple's two Irish subsidiaries to what was a stateless head office. These head offices existed only on paper – no desks, no chairs, no activity. So the profits were not taxed anywhere.”
Apple, which says it paid $577 million in taxes between 2003 and 2014 – 12.5% of its profits earned in Ireland – said in a statement to parliament that it “never entered into any special arrangements” with the country. BBC.
It also said: “The European Commission is attempting to change the rules retroactively and ignore the fact that, as required by international tax law, our income was already taxed in the US. We are disappointed with today's decision, as the General Court previously looked at the facts and categorically quashed this case.”
The decision also cast a shadow over the opening on September 9. New line of Apple technologiesincluding iPhone 16, Apple Watch Series 10 and AirPods 4.
SEE: iPhone 16 Cheat Sheet: Key Specs, Price, Tricks, and More
European Court ruling called 'dramatic'
The Irish government has one of the lowest corporate tax rates in the EU at 12.5%, making it a popular choice for European tech headquarters. Apple’s EMEA base is in Cork, while Meta is based in Dublin.
Ireland filed an appeal a 2016 European Commission ruling that said there was “no intellectual property activity in Ireland” and so the profits were not attributed to Apple's Irish subsidiaries. The company also said its approach to taxing intellectual property is consistent with that of 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 ruling is dramatic, not least because it overturns the findings of the EU General Court, which upheld Apple’s appeal against the Commission’s findings that the company had received illegal state aid through tax breaks granted by the Irish government.
“In essence, the ECJ found that the General Court had taken too literal an approach when it held that the Commission had not demonstrated to the required standard that Apple's non-US income should be attributed to Ireland and to the appropriate level of taxation. Instead, the ECJ was prepared to look at the merits of the situation and whether, overall, Apple had been more favourable to the Irish government than it should have been.
“From a financial perspective, Apple will now have to give up €13 billion that was sitting in an escrow account pending the outcome of the case. But perhaps more important will be the sense that EU authorities and courts are once again ready to flex their (collective) muscles to rein in Big Tech when necessary.”
On June 24, Apple became First tech giant to be formally charged by European Commission for violation of 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 purchasing options. This is contrary to the DMA, which states that developers should be able to direct their customers to purchasing options outside the App Store easily and free of charge.
Apple took series of actions in January to comply with the DMA, including changing its payment system for EU app sellers and giving up App Store control over the distribution of iOS apps in the EU. It also began prompting EU iOS users to choose a preferred browser instead of the default Safari. However, it was fined €1.84 billion. in March for introducing anti-raiding provisions against music streaming apps.
Google's appeal against the €2.42 billion antitrust fine was also rejected by the European Court of Justice.
Apple was not the only tech giant to come under scrutiny from the European Court of Justice on Tuesday: The court also upheld a €2.42 billion antitrust fine imposed on Google's parent company Alphabet, confirming an earlier ruling by the General Court.
The fine was imposed by the European Commission in 2017 after it found that Google had abused its dominant position in the online search market by favoring its own price comparison service over European competitors.
“Google's conduct was discriminatory and did not fall within the scope of competition law,” the European Court said in its ruling. press release.
Vestager called the decision a “big win for digital justice” post on XGoogle told the BBC it was disappointed with the decision and that it had made changes in 2017 to comply with the Commission's requirements.
During Vestager's tenure as commissioner, Google has faced EU antitrust fines totaling €8.25 billion. The €4 billion fine in 2018 for forcing Android device makers to pre-install Google Search and Chrome was the largest in EU antitrust history.
The European Commission also told Google that “Mandatory Sale” parts of its ad-tech business will be the only way to address its competition concerns after the company disclosed its preliminary view in March that it had breached EU antitrust rules.
EU investigation into how Google's Compliance with the New Digital Markets Act remains ongoing. Regulators say it promotes its own services above third-party ones in search results and is therefore a “gatekeeper.”
In March, Google temporarily removed some search widgets, for example Google Flightsto provide greater access to individual businesses in response to the entry into force 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 challenged Google’s ad tech practices. Last week, the UK’s Competition and Markets Authority temporarily ruled that Google's ad tech dominance hurts competitors and as a result could be fined up to 10% of its global annual turnover.
Google is also seeking to appeal a UK court ruling in June that allowed a case by Ad Tech Collective Action LLP to proceed to trial. The online publisher collective claims Google abused its dominant position in the digital advertising technology sector, causing it £13.6bn in losses.
U.S. Department of Justice and State Attorneys General initiated an antitrust investigation in 2020alleging that Google “illegally used distribution agreements to prevent competition.” That investigation is ongoing.
In August, a federal judge ruled that the tech company has a monopoly on general search services and text advertising and violated antitrust laws.