European Commission rules manufacturer’s tax benefits were illegal and breaks EU state aid rules
Apple has been ordered to pay up to ‚¬13 billion (£11 billion) in Irish taxes, the European Commission (EC) has ruled.
Following a three year investigation, it concluded that Ireland granted undue tax benefits to the manufacturer.
This is illegal under EU state aid rules as it allowed Apple to pay substantially less tax than other businesses. Ireland has been told to recover the illegal aid.
EC commissioner Margrethe Vestager, in charge of competition policy, said: “Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules.
“The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.
“In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.”
“Profound and harmful effect”
Apple said in a statement the decision will have a “profound and harmful effect on investment and job creation in Europe”, adding it will appeal and is confident the decision will be overturned.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process.
“The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money. It will have a profound and harmful effect on investment and job creation in Europe.
“Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned.”
Following an investigation launched in June 2014, the EC concluded that two tax ruling issued by Ireland to Apple have “substantially and artificially lowered the tax paid by the manufacturer in Ireland since 1991”.
It found the rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group – Apple Sales International and Apple Operations Europe, with almost all sales profits recorded by them attributed to a “head office”.
The EC’s assessment showed these “head offices” existed only on paper and could not have generated such profits.
These profits were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force.
As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporation tax rate that declined form one per cent in 2003 to 0.005 per cent in 2014 on the profits of Apple Sales International. The standard rate of Irish corporate tax is 12.5 per cent.
It concluded this is illegal under EU state rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules.