Apple wins EU court battle over Irish tax bill of $15 billion

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Technology giant Apple (AAPL) has won its court battle with the EU over a disputed €13 billion ($15 billion) tax bill.

Apple won a key round in a legal battle with the European Union as the General Court, the EU’s second-highest court, in a Wednesday ruling sided with the U.S. technology giant over €13 billion ($14.8 billion) in back taxes that antitrust officials had ordered the company to pay.

The European Commission, the EU’s executive arm, had in 2016 ruled that Apple’s tax dealings with the Irish government violated European law and set what then its highest fine ever. Margrethe Vestager, the European commissioner for competition, said back then that the iPhone maker got undue tax benefits in Ireland, essentially providing state aid to the corporation.

Apple, led by CEO Tim Cook, and the Irish government have argued that, because the tech firm’s products and services are created, designed and engineered in the U.S., the bulk of its financial benefit is created there and that the Irish tax scheme is legal. Apple also said it paid Ireland’s 12.5 percent rate on all the income that it generates in the country.

In a hearing at the General Court last year, Apple’s legal team said that the European Commission’s decision had “defied reality and common sense.”

Now, the General Court annulled the decision, arguing that the European Commission had failed to show “to the requisite legal standard” that Apple was granted an illegal advantage.

It’s a big loss for Margrethe Vestager, the E.U. competition chief. She has regularly targeted such arrangements, angering tech executives like Tim Cook of Apple, who derided the campaign as “total political crap.” (Even so, the bill would have amounted to a bit more than the tech giant earns in a quarter.)

The same court overturned a similar demand involving Starbucks last year. The directorate Ms. Vestager runs “did not succeed in showing to the requisite legal standard that there was an advantage,” the court ruled. Expect Ms. Vestager to appeal the decision.

The decision is being described as a big blow to the European Commission’s efforts to extract more tax from big tech giants — a mission that has been spearheaded by Margrethe Vestager, the Commission’s EVP.

Apple said: “We are pleased they have annulled the Commission’s case. This case was not about how much tax we pay, but where we are required to pay it. We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society.”

The Irish government, which also appealed against the 2016 ruling, welcomed the General Court’s ruling. “Ireland has always been clear that there was no special treatment provided to the two Apple companies – ASI and AOE. The correct amount of Irish tax was charged taxation in line with normal Irish taxation rules,” it said.

The European Commission can appeal the ruling, which would mean the case is elevated to the Court of Justice of the European Union, the EU’s highest court.

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