AAPL Apple Inc

By Sam Schechner 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 25, 2018).

Apple Inc. completed an agreement with Ireland enabling the company to transfer roughly EUR13 billion ($16 billion) into a Dublin escrow account, in a step toward complying with a European Commission tax order.

The executive body of the European Union ruled in 2016 that Apple had underreported profit in Ireland over more than a decade because of two tax deals with the Irish government. The EU viewed the tax treatment as illegal state aid that must be repaid. Ireland and Apple, which has a large facility in the city of Cork, are appealing the decision, but the U.S. company was required to hand over the money for the back taxes in the meantime.

Apple and Ireland have struggled to find a way to park such a large sum. In December, they agreed on the terms of an escrow account, but hadn't yet completed those terms or determined when Apple should start depositing the cash.

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 the profit as taxable in Ireland. The commission had given Ireland until the beginning of last year to recover the money.

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

Despite the large infusion of tax revenue, 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 25, 2018 02:47 ET (06:47 GMT)

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