Apple ordered to pay $14B in back taxes after losing EU court battle

The European Commission issued the order to pay $14 billion in back taxes eight years ago. It was recognized that Apple benefited from two Irish tax rulings that artificially reduced its tax burden.

According to Reuters, the company argued that the order "defies reality and common sense. " Ireland, whose low tax rates helped attract large technology companies and encouraged them to establish their European headquarters in the country, also contested the decision.

The order was appealed to the Court of Justice of the EU, based in Luxembourg, which sided with the European Commission on Tuesday.

"The Court of Justice gives final judgment in the matter and confirms the European Commission’s 2016 decision: Ireland granted Apple unlawful aid which Ireland is required to recover," stated the Court of Justice.

Apple is disappointed with the ruling. "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 U.S.," the company stated, as quoted by Reuters.

The ruling is final and cannot be appealed. EU Vice President Margrethe Vestager said at a press conference in Brussels that the European Union will continue to act against harmful tax competition and aggressive tax planning by EU countries and multinational corporations through legislative proposals and law enforcement.

Today is a huge win for European citizens and tax justice. The Court of Justice gives final judgment in the matter and confirms the European Commission’s 2016 decision: Ireland granted Apple unlawful aid which Ireland is required to recover - she said.

She added that it is a victory for "equal opportunities in the single market and tax justice." "Following an in-depth state aid investigation launched in June 2014, the European Commission has 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 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," she explained.

In her opinion, the case is symbolic because it showed that even the most powerful technology companies can be held accountable. "No one is above the law," emphasized Vestager.