Apple must repay $14.5 billion in underpaid taxes in Ireland

Two Irish tax rulings constituted illegal state aid, the European Commission has ruled

Apple's tax benefits in Ireland are illegal, and the company will have to pay up to €13 billion (US$14.5 billion) in back taxes, plus interest.

That's the verdict European Commissioner Margrethe Vestager delivered Tuesday, wrapping up a two-year investigation of the company's tax affairs stretching back to 2003.

The investigation found that Apple's effective tax rate on profit reported in Ireland was just €500 per million euros in profit, falling to €50 per million in 2014.

"I would have a feeling if my effective tax rate were 0.05 percent, falling to 0.005 percent. I would feel that maybe I should have another look at my tax bill," she said.

The Commission looked into tax rulings granted by the Irish government to two Apple subsidiaries, Apple Operations Europe, which makes some Apple computers, and Apple Sales International, which resells the company's products throughout Europe, the Middle East, Africa and India.

The latter accounts for almost all the unpaid taxes Ireland now needs to recover, Vestager said.

Vestager said that the Irish tax authorities had allowed Apple to split profit from the two companies, which were subject to normal taxes, with "head office" companies that were subject to no taxes, either in Ireland or elsewhere.

"Splitting the profits did not have any factual or economic justification. The so-called head office had no employees, no premises, no real activities," she said. Those head-office companies were allocated almost all the profits.

This selective tax treatment in Ireland is illegal under European Union state aid rules, she said, and distorts competition.

To restore fair competition, Ireland must recover up to €13 billion in back taxes from Apple for the period from 2003 to 2014.

"It is for the Irish authorities to determine the exact amount and the modalities of payment," she said.

Apple will have to pay up even if the ruling is appealed, with the money going into an escrow account, she said.

Should the U.S. government decide to change its tax rules so that Apple owes more tax in the U.S. on its EU profits, then the sum to be repaid in Ireland could be reduced by a corresponding amount, she said.

Apple is not the only company in the Commission's sights: It has also issued tax rulings against Starbucks and Fiat, and is still investigating Amazon.com and McDonalds in Luxembourg, Vestager said.

"All companies, big or small, should pay taxes where they make their profits. We need changes in corporate philosophies, and we need changes in legislation to address loopholes and to ensure transparency," she concluded.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Apple

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.
Peter Sayer

Peter Sayer

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?