EU orders Ireland to recover 13-bn euros tax from Apple

The Dollar Business Bureau

The European Union (EU) has ordered Ireland to recover the illegal aid of 13 billion euros from US tech firm Apple. Ireland has allowed Apple to pay significantly less taxes when compared to other businesses. This is illegal under EU state aid rules, the European Commission said in a statement on Tuesday.

According to European Commissioner Margrethe Vestager, the EU member states cannot give tax benefits to few chosen companies. The commission has concluded that Ireland granted illegal tax benefits for many years. This selective treatment has allowed Apple to pay corporate tax rate at 0.005% of its profits in 2014 while it was 1% in 2003.

After an in-depth investigation, the commission has come to a conclusion that Ireland has issued two tax rulings to substantially lower the tax paid by Apple since 1991. The profits registered by two companies of Apple Group - Apple Sales International and Apple Operations Europe - were attributed to ‘head offices’ that existed only on paper. The profits allocated to these head offices were not taxable in any country under the provisions of Irish tax laws.

Under these tax rulings, Apple has paid a corporate tax at a rate of 1% in 2003 which has further declined to 0.005% in 2014 over the profits of Apple Sales International. This selective tax treatment is illegal under EU state aid rules. So, the commission has ordered to recover the unpaid taxes with interest for a ten-year period from 2003 to 2014.

The tax treatment in Ireland made Apple to avoid taxes on profits in the entire EU market due to its decision to record all sales in Ireland instead of the countries where its products were actually sold.

The two Irish incorporated firms have made yearly payments about $2 billion in 2011 to Apple in the US to fund its R&D efforts in developing global intellectual property. These payments have significantly increased in 2014. The tax ruling was terminated when the two companies have changed their structures in 2015.