EU court decides Tuesday: Does Apple have to pay 13 billion in back taxes?

Apple is facing back taxes of 13 billion euros in the European Union. The European Court of Justice (ECJ) will decide on Tuesday, September 10, whether this will happen. The legal dispute between Apple and the European Commission concerns tax concessions that Ireland has granted Apple in recent decades. The ruling could also have a signal effect on other deals between EU states and international corporations that have chosen their European headquarters in the past due to low taxes.

The first hearing of the case before the ECJ in Luxembourgtook place in May. The Commission hopes that a ruling by the court of first instance will be overturned due to legal errors. It accuses Ireland of "unlawful state aid" because Apple effectively paid a tax rate of just 0.005 percent in 2014. The US-based company, which has maintained a European branch in Cook (Ireland) since 1980, had received benefits for decades. In 2016, EU Competition Commissioner Margrethe Vestager ordered Ireland to reclaim 13 billion euros plus interest from Apple.

New law also conceivable

In 2020, however, the order was overturned by the court in Luxembourg. The judges ruled that the Commission could not conclusively prove that Apple had gained a competitive advantage. Apple's lawyers had argued that the revenue from Ireland would mainly have to be taxed in the USA. The additional claim would therefore be tantamount to double taxation. However, three years later, in 2023, an Advocate General of the ECJ recommended that the 2020 decision be overturned and the case re-examined.

In addition to Apple, the EU Commission has also taken action against tax deals by Amazon, Fiat and Starbucks in the past – but has been defeated in court several times. If the Commission loses the case against Apple again, experts expect the reaction to be new legislation that will make it more difficult for countries such as Ireland to reduce corporate taxes in the future when competing for business locations.

This is Apple's argument

In the past, Apple argued that the Irish subsidiary was only responsible for the distribution of hardware outside its home market, but that the actual value was created in the USA. However, the iPhone manufacturer was also reluctant to make tax payments in its home market for a long time in the past. It was only as a result of a tax reform in 2018 that Apple transferred billions of dollars abroad back to the USA and paid almost 38 billion US dollars in taxes there.

(mki)