After two years of investigation The European Commission ruled that Ireland granted undue tax benefits of up to €13 billion to Apple is illegal under EU state aid rules. The deal allowed Apple to pay substantially less tax than other businesses. Apple Ireland must now pay back the $14.5 billion illegal aid.
This is the first time the EC has actually put a dollar value on Apple’s tax liability.
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In today statement, Margrethe Vestager, the European competition commissioner, said the EC found that the Irish government had broken state aid rules by signing deals that allowed Apple to massive reduce its tax bill.
“Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014.” the statment said.
In June 2014, the European Commission had already issued a preliminary decision that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991.
While Apple has the huge amount of money in the bank, the Irish Times newspaper had suggested the at the end the company is more likely to pay hundreds of millions of dollars.
READ MORE: The sever statement also added
“The rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe), which did not correspond to economic reality: almost all sales profits recorded by the two companies were internally attributed to a “head office”.
The Commission’s assessment showed that these “head offices” existed only on paper and could not have generated such profits. These profits allocated to the “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force. As a result of the allocation method endorsed in the tax rulings, Apple only paid an effective corporate tax rate that declined from 1% in 2003 to 0.005% in 2014 on the profits of Apple Sales International…”
“In fact, the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple’s decision to record all sales in Ireland rather than in the countries where the products were sold. This structure is however outside the remit of EU state aid control. If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland.”
