AAPL Apple Inc

By Sam Schechner 

Apple Inc. completed an agreement with Ireland that will allow it to transfer roughly 13 billion euros ($16 billion) into a Dublin escrow account, in a step toward complying with a European Commission order to pay back taxes.

The commission, the executive body of the European Union, in 2016 ruled that Apple had underreported profit in Ireland over more than a decade because of two tax deals with the Irish government. That, the EU says, is illegal state aid that must be repaid. Apple and Ireland are appealing the decision, but Apple is required to hand over the money in the meantime.

Apple and Ireland have struggled to come up with a way to park such a big chunk of change. In December, they agreed on the terms of an escrow account, but hadn't yet completed those terms or determined when Apple should start transferring cash into it.

In its 2016 decision, the European Commission said tax arrangements that Ireland offered Apple in 1991 and 2007 allowed the company to pay annual tax rates of between 0.005% and 1% on its European profits for over a decade to 2014 by designating only a tiny portion of its profit as taxable in Ireland. The commission had given Ireland until January 3, 2017, to recover the money.

Ireland said Tuesday that Apple will pay the cash, plus interest, into the account in installments next month through September. Neither Ireland nor Apple have said exactly how much Apple ultimately pay Ireland, though a formula has been agreed upon, a spokesman for the Irish Finance Ministry said.

Despite the large cash infusion, Dublin has opposed the EU decision against Apple. The tech company is a big employer in the country, and Ireland has said its tax deals with it didn't constitute special treatment.

"The government fundamentally disagrees with the ruling of the commission," said Paschal Donohoe, Ireland's finance minister. "However, as committed members of the European Union, Ireland is intent on complying with our binding legal obligations in this regard."

An Apple spokesman said, "We continue to cooperate with Ireland on the recovery process," adding that it is confident that EU courts "will overturn the commission's decision."

Setting up an escrow account and collecting the money could help ease tensions between Ireland and the EU. Last fall, the EU referred Dublin to the European Court of Justice, the bloc's highest court, for failing to collect the back taxes from Apple more than a year after it was ordered to do so.

--Natalia Drozdiak contributed to this article.

Write to Sam Schechner at sam.schechner@wsj.com

(END) Dow Jones Newswires

April 24, 2018 14:09 ET (18:09 GMT)

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