Apple says EC probe could lead to back tax payments

Impact of the payment of the disputed back taxes could be 'material,' Apple says

Apple CEO Tim Cook. Credit: lemagit via Flickr

Apple has warned that a European Commission investigation into its tax payments in Ireland could lead to the company's having to pay disputed past taxes covering up to 10 years.

The company said the impact could be "material," but did not provide an estimate.

The EC launched an investigation last year into a tax deal between Ireland and Apple to ascertain whether the taxes the company paid complied with European Union rules on state aid.

The investigation would address rulings by Irish tax authorities on the calculation of the taxable profit allocated to the Irish branches of Apple Sales International and Apple Operations Europe, to find out if the rulings involved state aid that benefited the company.

EU member states are banned from providing financial assistance in a way that distorts competition, including through tax rulings. Tax rulings may involve state aid within the meaning of EU rules if they are used to provide selective advantages to a specific company or group of companies, the EC said in June, while announcing the probe.

The Commission also started investigations at the time into taxes paid by two non-tech companies in two other EU member states, which like Ireland, are seen as low-tax jurisdictions. The EC said that besides the Apple investigation, it would investigate Starbucks in the Netherlands, and Fiat Finance and Trade in Luxembourg.

Apple has said that the EC's assertions are without merit. But in a filing to the U.S. Securities and Exchange Commission, it warned that if the Commission were to rule against Ireland, it could require Ireland to recover from the company past taxes "covering a period of up to 10 years reflective of the disallowed state aid."

"While such amount could be material, as of March 28, 2015 the Company is unable to estimate the impact," Apple said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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