Apple Finishes Paying $15.3B in Back Taxes to Ireland, Prompting EU Regulators to Drop Lawsuit

Just over two years after the European Commission ruled that Apple was receiving illegal state aid from Ireland -- where it had reportedly paid less than 2 percent in taxes compared to the country's headline 12.5 percent corporate tax rate -- Apple has now paid back the entire 13.1 billion euros ($15.3 billion) it owed in back taxes (via Reuters).

The European Commission confirmed the payment this week, and furthermore said that EU antitrust regulators now plan to drop all legal action against Ireland. The EU had originally taken Ireland to court for failing to recover the $15.3 billion in tax due from Apple.

The confirmation of the withdrawal of litigation came from an email sent by European Commission spokesman Ricardo Cardoso:
“In light of the full payment by Apple of the illegal State aid it had received from Ireland, Commissioner Vestager will be proposing to the College of Commissioners the withdrawal of this court action,” Commission spokesman Ricardo Cardoso said in an email.
Although the EU gave its final ruling in August 2016 regarding Apple's tax loophole in Ireland, the regulatory body had first kicked off an investigation into Apple's tax arrangements back in 2014. The ruling eventually found that Apple was allowed to pay an effective corporate tax rate of 1 percent on its European profits in 2003, down to 0.005 percent in 2014. Specifically in 2014, Apple paid 0.005 percent tax on EU profits, which means that "For every million euros in profits, it (Apple) paid just €500 in taxes," said European Competition Commissioner Margrethe Vestager at the time.

Apple and CEO Tim Cook were adamant that the ruling was based on "fundamental errors" and Cook referred to the tax avoidance accusations as "total political crap." He elaborated, stating that Apple pays all of the taxes it owes based on the laws of each country in which it operates. Likewise, the Irish government said it did not give favorable tax treatment to Apple and added that it "does not do deals with taxpayers."

Apple and Ireland eventually moved to appeal the ruling, but as things escalated the European Commission decided to open litigation against Ireland in October 2017 for its failure to procure Apple's back taxes. Eventually, Apple began paying the back taxes it owed around March 2018, and in a report from earlier in the year sources stated that payments were expected to finish around September.

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Apple Turns Down Invite to EU Hearing on Tax Evasion Because it Could Be ‘Detrimental’ to Appeal Process

As Apple continues to face a legal battle with the European Commission concerning the regulator's claim that Apple received illegal state aid from Ireland and owes billions in back taxes, the latest development has seen the Cupertino company decline an invitation to testify before a special committee on the tax evasion claims (via Reuters).

According to a letter to the European Parliament shared on Twitter today by Parliament member Sven Giegold, Apple said it "will not be able to participate in a public hearing" on the topic of tax evasion.

The company's senior director for European government affairs, Claire Thwaites, explained that while the company appeals the Commission's decision alleging state aid from Ireland, "it is important to ensure public commentary does not prejudice those proceedings."


Because of this, Apple fears its presence at the June 21 EU hearing "could be detrimental" to its appeal, and "any potential appeals thereafter." Thwaites ended the letter by stating Apple would, however, be open to meeting privately with Committee members to address questions on its decision.
Since the appeal is ongoing and likely to be heard at the General Court in the near future we will not be able to participate in a public hearing on this topic as it could be detrimental to the proceedings at the Court, and any potential appeals thereafter.

I'd like to emphasize that we have the deepest respect for the Committee, it's members and the important work you are undertaking. We would be happy to meet privately with you or other Committee members and address any questions you may have.
Despite Apple's appeal, the company has started paying the 13 billion euros in back taxes to the Irish government this month. Like the wording in Thwaites' letter today, Apple has remained adamant that the company follows the law and pays "every cent of tax" it owes "in every country" it operates. In the wake of the legal battle, Apple CEO Tim Cook called the decision "total political crap" back in 2016, saying that "the decision is wrong, and it's not based on law or facts, it's based on politics. And I think it's very important that we stand up and say that very loudly."

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Apple Will Start Paying Back Taxes to Irish Government Next Month Amid Legal Battle With European Regulators

Apple will start paying 13 billion euros in back taxes to the Irish government from May, according to the Financial Times, nearly two years after the European Commission ruled that the company received illegal aid from the country that saw its tax bill significantly reduced over the past few decades.


As expected, the report states that Apple and the Irish government have reached an agreement to set up an escrow account to hold the money while both sides appeal the August 2016 ruling in Europe's highest court. Once the amount has been received in full, additional interest payments will be calculated.

Ireland's finance minister Paschal Donohoe today said the appeal process is likely to begin in the fall, according to Reuters.

Ireland is required to hold the funds in escrow until the legal process is completed, according to the report. Apple previously said the amount will be reported as restricted cash on its balance sheet once it begins making payments.

For background, the European Commission said the Irish government gave Apple unfair advantage between 1991 and 2007 by allowing the company to move income from the European market through two "non-resident" head office subsidiaries based in Ireland, but Apple says there are "fundamental errors" in the findings.

Apple CEO Tim Cook previously called the decision "total political crap" and said Apple pays all of the taxes it owes based on the laws of each country in which it operates. Likewise, the Irish government said it did not give favorable tax treatment to Apple and added that it "does not do deals with taxpayers."

Apple expects its appeal with the European Union's highest courts to take several years, but it is confident the European Commission's decision will be overturned, in which case the 13 billion euros would be returned to the company.

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Apple to Begin Paying $16 Billion to Ireland Around March Amid Legal Battle With European Commission

Ireland will begin collecting €13 billion from Apple around March, with payments expected to continue through September, according to Irish broadcaster RTÉ via Cult of Mac.

Derek Moran, the Secretary General of Ireland's Department of Finance:
"However, identification of the escrow agent/custodian by the end of March 2018 will then allow for a payment into the escrow fund account, with payments continuing through the course of April, May and June and up to the end of September 2018".
The money will be held in an escrow account while both Apple and Ireland continue to battle the European Commission, which in August 2016 ruled the iPhone maker received illegal state aid from the country, and ordered the Irish government to collect up to 13 billion euros—nearly $16 billion currently—in back taxes.

Ireland is required to collect the money until the legal process is completed, according to the report. Apple has previously said the money will be reported as restricted cash on its balance sheet once it begins making payments.

The premise is that the Irish government gave Apple unfair advantage between 1991 and 2007 by allowing the company to move income from the European market through two "non-resident" head office subsidiaries based in Ireland, but Apple says the European Commission made "fundamental errors" in its findings.

Apple CEO Tim Cook has called the decision "total political crap" and said Apple pays all of the taxes it owes based on the laws of each country in which it operates. Likewise, the Irish government said it did not give favourable tax treatment to Apple and added that it "does not do deals with taxpayers."

Apple expects its appeal with the European Union's highest courts to take several years, but it is confident the European Commission's decision will be overturned, in which case the €13 billion would be returned to the company.

Apple's plans to repatriate much of its foreign cash reserves under new U.S. tax laws, which lower the corporate tax rate to 15.5 percent, will have no affect on the outcome of this European tax case.

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E.U. to Take Ireland to Court For Failing to Claim Apple Tax

The European Commission said on Wednesday it will take Ireland to court for its failure to recover up to 13 billion euros ($15.3 billion) of tax due from Apple (via Reuters). Apple was ordered to pay the unpaid taxes in August 2016 after the Commission ruled that the company had received illegal state aid.

The Commission argued that Irish revenue commissioners gave Apple unfair advantage between 1991 and 2007 by allowing the company to move income from the European market through two "non-resident" head office subsidiaries based in Ireland. Ireland vowed to appeal the ruling.
“More than one year after the Commission adopted this decision, Ireland has still not recovered the money,” EU Competition Commissioner Margrethe Vestager said, adding that Dublin had not even sought a portion of the sum.

“We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But member states need to make sufficient progress to restore competition,” she added.

The Commission said the deadline for Ireland to implement its decision had been Jan. 3 this year and that, until the aid was recovered, the company continued to benefit from an illegal advantage.
Ireland's finance ministry said it had never accepted the Commission's analysis in the Apple state aid decision, but would collect the money due pending Dublin's own appeal of the ruling.

"It is extremely regrettable that the Commission has taken this action, especially in relation to a case with such a large scale recovery amount," the ministry said in a statement.

Apple claimed earlier this year that the Commission made "fundamental errors" when it ruled that the company owed Ireland the unpaid taxes plus interest, and argued that the profits to those activities were attributable to the United States.

Apple CEO Tim Cook has called the EC's ruling "total political crap" and described the lower end 0.005 percent tax rate Apple is accused of paying as a "false number". The Apple CEO has previously said he believes the decision will be reversed.

In addition, Vestager announced a demand for Amazon to pay around 250 million euros in taxes to Luxembourg. Amazon denied it owed any back tax, and claimed it had not received any "special treatment" from Luxembourg.

"We will study the Commission's ruling and consider our legal options, including an appeal," an Amazon spokesperson said.

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