Apple successfully appeals €13 billion tax ruling

Tax Hot Topics newsletter The European Union (EU) General Court delivered a significant victory to Apple and Ireland this month, overturning €13.1 billion in taxes levied against the company in a prior decision issued by the European Commission (EC).

The EC made its initial ruling in August 2016 after finding that Apple had generated significant profits through two Irish subsidiaries, most of which were not taxed in any jurisdiction. It determined that the profits in question should have been taxed in Ireland, despite the fact that the subsidiaries were not tax resident in Ireland, and alleged that Ireland gave Apple favorable treatment. Ireland was ordered to collect 10 years of back taxes plus interest. Apple and Ireland both contested the decision.

Companies that are not tax resident in Ireland are generally only taxed on the profits arising from their Irish operations. The EC was unsuccessful in proving to the EU General Court that all profits of non-Irish tax resident companies, not just those generated by Irish operations, should be taxed in Ireland. The court also held that Apple was not granted favorable tax treatment by Ireland.

The EC is likely to appeal the court’s ruling to the European Court of Justice (ECJ). A final decision could take years, but the ECJ rarely overturns the EU General Court. For additional details and insights, see Grant Thornton Ireland’s story, ‘Ireland and Apple win their appeal against the tax ruling by the EU Commission.’

David Sites
Washington National Tax Office
T +1 202 861 4104

Peter Vale
Dublin Office
+1 353 1 6805 952

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