In a setback to US tech giant Apple just before the much-awaited launch of its iPhone 7, the European Commission on Tuesday announced that Ireland must demand 13 billion euros in taxes from the Cupertino, San Francisco-based company.
“We have concluded that Ireland granted undue tax benefits of up to 13 billion euros to Apple. This is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid,” an EU statement read.
Following an in-depth state aid investigation launched in June 2014, the European Commission concluded that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991.
“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 statement further said.
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to the “head offices” were not subject to tax in any country under specific provisions of the Irish tax law, which are no longer in force.