Photo courtesy of Reuters.
Summary: Apple was ordered to pay $16 billion to Ireland, but the company will not be able to write off the money on its U.S. taxes.
Ireland will begin to collect $16 billion from Apple this year, and the money will be held in an escrow account that will be set up by the end of March.
According to Digital Trends, Apple will pay its debt to Ireland starting in March and ending in September. In 2016, the European Commission ruled that the technology company received an illegal deal that allowed it to pay less than the 12.5 percent corporate tax rate, and that this deal was unfair to competitors.
“The Commission’s 2016 state aid decision found that, over many years, tax rulings issued by Ireland had allowed Apple to pay less tax on profits recorded in Ireland than other companies subject to (the) same national taxation laws,” a spokesman for the European Commission said. “This gave Apple an illegal advantage in breach of EU state aid rules, which must now be recovered by Ireland — nothing has changed in that regard.”
The European Union had said Apple received illegal state aid, and Ireland and Apple are appealing the ruling. However, according to RTE, the country is collecting the money as part of the legal process.
Apple has argued that the European Commission made “fundamental errors” in its decision, and Apple CEO Tim Cook called the decision “total political crap,” according to Mac Rumors. The tech giant has said that they believe the judgment will be overturned, and in that case, they will get their money back.
In addition to the Irish payment, Apple announced on Thursday that they will pay $38 billion in U.S. tax on its overseas cash, Reuters stated. This amount will not reduce the money it owes as part of the European Union order.
“Ireland has an obligation to recover (money) that is binding under EU law. Changes to U.S. legislation do not alter such an obligation,” a spokesman for the Irish government said.
Apple has almost $250 billion in off-shore money, according to the Irish Times, and a large percentage of that cash is in Ireland. Recently, the United States government passed legislation on money kept in foreign banks, and that is the reason for the $38 billion bill. In the past, companies could write off payments such as the $16 billion EU judgment, but that is no longer allowed.
“Normally when a company pays tax overseas, it is allowed to reduce its tax bill in its home country by receiving a credit equal to the amount paid. However, the new US tax legislation is offering a special once-off rate of 15.5 percent for repatriated cash and offers reduced credits against the resulting tax bill for tax paid overseas. If Apple paid the full €13 billion in tax, it would, under the rules, receive a US credit of around €5.76 billion. The arrangement would also have to be approved by the US tax authorities and, as the Apple situation is unusual, some uncertainty still surrounds its likely tax treatment,” the Irish Times wrote.