Apple has told Wall Street investors it will need to book as much as a $10 billion (€9.1 billion) tax charge in the final three months of its financial year to the end of this month, following a shock ruling by the EU’s highest court that it must settle a long-disputed multibillion-euro Irish tax bill.
The one-time charge will increase the Californian group’s effective tax rate for the period, it said in a stock exchange statement on Tuesday.
The move is being taken to reconcile issues that have arisen as a result of the ruling earlier in the day by the Court of Justice of the European Union (ECJ) that the European Commission had been correct in determining eight years ago that Apple owed Ireland €13 billion, plus interest, in back taxes.
The matter had ended up in the top EU court as the iPhone maker and the Irish State had consistently argued through years of legal wranglings with the commission that the taxes were not owed and that the government did not give sweetheart tax deals to the company.
Apple said immediately after the ECJ ruling that the case “has never been about how much tax we pay, but which government we are required to pay it to”. It said that it has already paid $20 billion in tax to the US on the very same profits the commission claimed should have been taxed in Ireland.
The Irish government has held a sum covering the disputed tax bill, plus interest, in an escrow account since 2018. It initially amounted to €14.3 billion.
It subsequently fell in value to as little as €13.4 billion at the end of 2022. This was largely down to the fact that the money is invested mainly in European government bonds, whose values had been volatile in recent years.
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But it also reflected how hundreds of millions of euro were transferred from the escrow account to pay tax claims in another jurisdiction, as allowed under the terms of the escrow arrangement. Some €209 million of such so-called third country adjustments were made in 2019, followed by a further €246 million in 2021.
Minister for Finance Jack Chambers said the value of assets in the escrow account currently amounts to about €14 billion. The rebound would have been driven by an increase in bond values from their lows in recent years.
He added he expects most of the funds to end up with the exchequer, though some may go to elsewhere to settle potential claims from other countries.
The ECJ on Tuesday “set aside” a ruling by the EU’s second-highest court, the General Court, four years ago, which had quashed the commission’s decision that Apple owed the Republic the back taxes. The long-running dispute is the world’s largest-ever antitrust case.
The ECJ said the lower court in Luxembourg had “erred” when it ruled the commission had not proved its case sufficiently.
“The decision is a lucrative one for Ireland, resulting in a windfall in the country’s favour, but undermines the Government’s long-standing position that Ireland does not give preferential tax treatment to any taxpayers, companies or otherwise,” said Robert Dever, tax partner at the Dublin office of international law firm Pinsent Masons.
“It is to be hoped that any damage to Ireland’s reputation internationally will be limited, having regard to the changes to the Irish tax code, including to the rules in respect of corporate tax residency and the attribution of profits to branches of non-resident companies, in the last number of years.”
In a statement on Tuesday, the Government said it will “respect the findings” of the court.
The Department of Finance said the judgment provides the final determination in the case and that the process of transferring the money in escrow to Ireland will now begin, though it will take months to finalise.
Tánaiste Micheál Martin insisted, however, that the money Ireland will now receive will not be used for “day-to-day spending”.
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