European Commission scores stunning court win in €13B Apple tax row

The European Commission scored a surprise win against Apple that confirmed its €13 billion back-tax bill for one of the world’s richest companies.

The Court of Justice tossed out a lower court judgment that reversed the Commission’s decision that Apple’s tax arrangements with Ireland were illegal.

“Ireland granted Apple unlawful aid which Ireland is required to recover,” the Court of Justice said on Tuesday. It stressed that its ruling was the “final judgment in the matter.”

This is a massive win for Competition Commissioner Margrethe Vestager’s crusade against “aggressive tax planning,” mostly targeting U.S. multinationals, since previous cases have faltered in the European Union courts.

“It was a win that made me cry because it is very important,” Vestager told a press conference. “It’s very important to show European taxpayers that once in a while tax justice can be done.”

The Apple case was part of a slew of probes aimed at how countries like Ireland and Luxembourg offered favorable tax treatment to hook the European headquarters of multinational firms.

Today’s ruling focuses on how two of the tech giant’s units were taxed in Ireland for handling intellectual property licenses for the company’s sales outside of North America. The General Court ruled in 2020 that the Commission was wrong to say those units had been given “selective advantage,” effectively a tax benefit not offered to others and thus unfair state aid.

Apple’s battles with the EU have widened with the company fined €1.8 billion earlier this year over its app store rules. It is now also facing three investigations over its non-compliance with digital competition rules.

Vestager said in June that Apple leaves a “sad aftertaste of illegal behavior.” The tax case alone “shows that Apple contributes very, very little when it comes to taxes, in the jurisdictions where they make their profits,” she said.

Apple said in 2017 that it had an effective tax rate of 21 percent on foreign earnings. The Commission said its effective tax rate on European profits was 1 percent in 2003 and 0.005 percent in 2014.

Apple spokesman Julien Trosdorf said on Tuesday that the case had “never been about how much tax we pay but which government we are required to pay it to.”

“We always pay all the taxes we owe wherever we operate and there has never been a special deal,” he said. “The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the US.”

Apple is “one of the largest taxpayers in the world,” he said.

The Irish finance ministry said: “Ireland does not give preferential tax treatment to any companies or taxpayers.” It said the case was of “historical relevance only” and it would now start transferring Apple’s payment which has been held in escrow and had grown to €13.8 billion by the end of last year.

The case is C-465/20 P Commission vs. Ireland and Others.

This article has been updated with comment from Margrethe Vestager, the Irish finance ministry and Apple