Apple files new challenge against $14.5B tax bill in Europe

Apple has attempted to school the European Commission on how it interprets Irish law, by lodging no less than 14 pleas in its challenge against competition officials in Brussels who have ordered the iPhone maker to pay Ireland €13 billion (£11.1 billion) in back taxes.

The Commission's decision followed a three year investigation into two rulings issued by Ireland in favour of two Apple group companies: Apple Sales International (ASI) and Apple Operations Europe (AOE).

The appeal has now been placed, and Apple is asking the appeal court to either partly overturn the Commission's ruling and pay its legal fees, or completely overturn the ruling. The Irish law has since been amended and Apple has now changed its operating structure.

The EC's demand for payment is based on its determination that Apple received a favorable - and illegal - tax ruling in 1991 and again in 2007 that set the company's tax rate in Ireland at just 4% on profits the company earned for the years between 2004 and 2014.

The company claimed that the commission was wrong in its conclusion that Apple's tax arrangements with Dublin had amounted to a sweetheart deal for more than a decade, thereby breaking state aid rules. The theory advanced by Apple is that the intellectual property rights were held by the company's "head office" in the United States. Thus, the income must be attributed to the Irish branch.

According to the EC, the tax treatment in Ireland enabled Apple to "avoid" tax on nearly all profits generated by sales of its products in the entire European Union single market.

It says that the European Union, "failed to recognise that the Irish branches carried out only routine functions and were not involved in the development and commercialisation of Apple IP, which drove profits".

The document added, "Ireland has not put forward any justification at all for the selective treatment, whereas Apple argues that the exercise of discretion is intrinsic to the Irish corporate tax system and that the ruling contributed to the effectiveness of the system and were proportionate".

Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said: "One of Apple's main arguments is that the profits from its activities were attributable to the United States, and not Ireland, because the development and commercialisation of its intellectual property was controlled and managed in the US".

  • Arturo Norris