Apple has published its defense to the European Commission's accusation that it obtained unfair commercial advantage from its corporation tax agreement with Ireland.
The company states that its profit-making activities were controlled and managed in the US, and so should be taxed there and not in Ireland; and that the Commission has breached Apple's 'fundamental rights' by ordering Ireland to charge it EUR13 billion in taxes.
Apple is appealing the European Commission’s August 2016 ruling, which concluded that it had entered into a sweetheart tax deal with the Irish government to “substantially and artificially” lower its taxes.
The commission’s investigations into Apple’s tax arrangements, as well as those of Starbucks Corp., had previously drawn the attention of the Obama administration, which complained that the commission appeared to be unfairly targeting U.S. businesses and that American taxpayers may end up having to foot the bill for foreign tax credits that the companies may be able to claim following a retroactive imposition of taxes.
A source confirmed to Law360 that the federal government has now filed an application with the European Union General Court to have its say on the retroactive application of state aid rules to Apple. The application has not been made publicly available.
The European Commission found that two tax rulings Ireland had issued to Apple in 1991 and 2007, allowing the software giant to allocate almost all of its sales profits to “head offices” that existed only on paper, were in violation of the EU’s state aid rules.
The allocation of profits to head offices, with no employees or physical locations, allowed Apple’s effective corporate tax rate to go down from 1 percent in 2003 to 0.005 percent in 2014 on the profits of the Irish-incorporated subsidiary Apple Sales International, the commission said.
Apple has refuted the commission’s findings, saying that the watchdog misunderstood Irish law and the role of its Irish units in developing intellectual property and failed to recognize that its main “profit-driving activities,” especially the development and commercialization of IP, were controlled and managed in the U.S.
The commission only considered the minutes of board meetings and did not properly assess “extensive expert evidence” that Apple’s profits were not attributable to activities in Ireland, the software giant said.
Read more at: Tax Times blog