Apple and Ireland hit back at EU over €13bn tax bill

Apple said it is paying around €20bn in tax in the US on those very same profits that the commission says should have been taxed by Ireland.

At the heart of the Apple case are questions on where value is created and where it should be taxed and concern two Apple units in Ireland. Picture: Dan Linehan

Apple and Ireland hit back at the European Union’s competition watchdog in a €13bn court clash that may help to define the legacy of Competition Commissioner Margrethe Vestager.

At an appeal hearing at the EU’s Court of Justice today, Apple said Ms Vestager’s team made legal errors when they concluded the iPhone maker was given vast amounts of unfair tax aid from Ireland and issued an order to repay the money.

“The essence of this case is simple, the commission just got the facts wrong about what activities went on in Ireland,” Daniel Beard, a lawyer for Apple, told the court. The commission’s analysis “was infected” by the “wrong legal premise,” added Paul Gallagher, a lawyer for Ireland.

The European Commission is in court to contest a painful setback at a lower tribunal in 2020 over its record bill for Apple, levied in 2016. The case is a crucial test of Ms Vestager’s ongoing crackdown on sweetheart tax deals for multinational firms. The top EU court’s binding ruling will help determine the course the commission can take as it’s vowed to keep up chasing unfair tax deals during Ms Vestager’s tenure, which comes to an end next year.

The EU appeal has taken on added importance following a series of crushing court defeats in other cases targeting Amazon and Stellantis' Fiat after judges faulted its findings that Ireland and Luxembourg had given the firms an unfair tax advantage. Earlier this month, the EU's top court annulled the commission’s 2018 order for Engie to pay back €120m in unfair fiscal aid to Luxembourg.

At the heart of the Apple case are questions on where value is created and where it should be taxed and concern two Apple units in Ireland. The firm argues that key decisions on its products are made at its Cupertino headquarters and that profits should be taxed there. Apple had delayed returning international profits to the US for years, citing high costs, until changes to the tax code saw it start repatriating foreign earnings in 2018.

Besides its reserves for future payments, Apple “is paying around €20bn in tax in the US on those very same profits that the commission says should have been taxed by Ireland,” Mr Beard said.

Ms Vestager has previously warned that the lower EU court’s ruling in favour of Apple would have “far-reaching consequences”. Apple’s Irish units recorded almost all profits from sales outside the Americas, she said.

The EU Commission said Apple’s Irish units took key decisions and “performed an array of functions” and the EU's lower court “annulled the commission’s findings of selective advantage by applying the wrong legal test”, according to its lawyer Paul-John Loewenthal.

The court will issue a non-binding opinion in the case on November 9, advocate general Giovanni Pitruzzella said at the end of the hearing. 

A final ruling is likely to follow within six months after that. Bloomberg