Financial Times: Apple Slapped with $14.5 Billion Tax Fine from EU

Tech behemoth Apple Inc. (NASDAQ:AAPL) is dealing with waning smartphone market share and renewed growth concerns, but now it has a new problem on its hands: a potential record fine from the European Union.

From the Financial Times:

Brussels has hit Apple with a record-breaking tax penalty of up to €13bn after finding the US tech group enjoyed a quarter of a century of illegal state support from Ireland that distorted competition in Europe.

The huge bill for back taxes — to which interest must be added — is at the extreme end of expectations. It sets the stage for a bruising transatlantic political tussle over the taxation of US multinationals, the alleged targeting of Silicon Valley by the EU authorities and the reach of Brussels into national tax policy.

For its part, Apple isn’t taking the massive ~$14.5 billion fine lying down:

In response, Apple said the European Commission was trying “to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process.”

The long-awaited decision has even ruffled the feathers of U.S. regulators:

The US Treasury said the “commission’s actions could threaten to undermine foreign investment, the business climate in Europe, and the important spirit of economic partnership between the US and the EU”.

Like many U.S. companies, Apple established a presence in tax-friendly Ireland via subsidiaries in order to avoid substantial taxation on portions of its massive profits. The EU has now ruled that Irish tax breaks given to the company were illegal, and Apple is ordered to pay back those tax benefits, plus interest.

The tax years in question run from 2003 through 2014. EU regulators claim that Apple’s tax rate during those years ran from a miniscule 1% to an almost non-existent 0.005%.

If upheld, the ruling could have massive implications for several other companies who sought tax refuge in the Emerald Isle. Apple is vowing to fight the ruling, and is “confident the decision will be overturned.”

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Apple shares fell $1.92 (-1.80%) to $104.90 in premarket trading Tuesday. AAPL is now just about flat year-to-date, while the benchmark S&P 500 index has risen around 7% in the same period.

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