European Union regulators reacted coolly to Apple Inc.’s move to repatriate hundreds of billions of overseas dollars to the U.S., saying “nothing has changed” in its order for the iPhone maker to pay back taxes to Ireland.
Apple will pay about $38 billion in U.S. taxes on money it’s repatriating to the U.S., the company said on Wednesday. The transfer comes after Congress scrapped tax rules that allowed corporations to defer U.S. income taxes on foreign earnings until they returned the income to the U.S. The EU was unmoved.
“Over many years, tax rulings issued by Ireland allowed Apple to pay less tax on profits recorded in Ireland than other companies,” the European Commission said in an emailed response to questions. “This gave Apple an illegal advantage.”
Ireland’s delay in extracting some 13 billion euros ($15.90 billion) in tax from Apple has already raised the ire of EU Competition Commissioner Margrethe Vestager. The EU is taking the Irish government to court for failing to recoup the money. Irish Prime Minister Leo Varadkar said it will start collecting the tax bill in the second quarter. Any funds will be held in escrow while Ireland and Apple fight the EU order at court.
Tax Credit
Apple may ultimately be able to get a foreign tax credit to recognize the Irish payment and reduce its U.S. bill, Mary Cosgrove, a lecturer at the School of Business and Economics, National University of Ireland, Galway, said in a tweet.
“If the appeal is lost by Apple, they pay the 13 billion euros to Ireland and they might be able to get a refund of the same amount from the U.S. against the U.S. tax liability, provided the U.S. treat it as a tax payment,” said Cosgrove, who previously worked in the tax advisory industry.
The new tax rules may mean Apple has little incentive to appeal the EU decision, “from a cash point of view,” Cosgrove said, as the tax would still have to be paid, albeit in the U.S., if it succeeded.
“Still, from a political and reputation point of view, they might want to push ahead,” she said. “Also, the U.S. might be keen for them to go ahead, because if it succeeds, the tax goes to the U.S., rather than Europe.”
By Aoife White and Dara Doyle.
