Apple Inc. has been asked by the European Commission to
pay tax of €13 billion plus interest to
the Irish Government. Such directions have been given by the European
Commission after its investigation that Ireland had granted undue tax benefits
to Apple Inc. which is illegal under the EU State Aid Rules.
The European Commission in its investigation found that
Apple Inc. was carrying on business in Ireland through its two subsidiary
companies, namely, Apple Sales
International and Apple Operations Europe.
The Irish subsidiaries were internally allocating almost
all their profits to their respective head office. These head offices were
existed only on papers and not based in any country. Therefore, Irish
Subsidiaries were paying tax in Ireland only on profits that were allocated to
Irish branch and not on majority of profits that were allocated to the ‘head
office’.
The Irish Apple subsidiaries were able to transfer
their profits to head office without paying any taxes because of two tax
rulings of Ireland whereby they were allowed to allocate most of their profits
to the head office and were liable to pay tax only on remaining part.
After assessing the business operations of Apple and
tax rulings of Ireland, the European Commission concluded that Ireland had
violated the EU State Aid Rules by allowing Apple’s subsidiaries to
artificially allocate their profits to non-existent head office.
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