Apple warns shareholders it may have to pay Irish back-tax

31 Oct 2014

Apple has warned shareholders the European Commission could require Ireland to recover past taxes from the consumer tech giant that are reflective of the disallowed State aid.

In its 10-K Annual Report filing to the Securities and Exchange Commission, Apple revealed that while the majority of the assembly of Apple’s products takes place in Asia, some final assembly is still done at the company’s operation in Cork, where it employs 2,000 people mostly engaged in international business operations.

Apple has had an operation in Cork since 1981, when it became the site of the then-fledgling start-up’s first international and overseas operation.

At the end of June, the European Union (EU) wrote to the Irish Government, accusing it and Apple of breaching the EU’s rules on State aid.

Apple warned shareholders that a ruling against Ireland could mean the company will have to pay more tax on profits in future years.

Formal investigation

In the document Apple said, “The company’s future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation, including in the US and Ireland.

“For example, in June 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Ireland with regard to the corporate income tax to be paid by two of the company’s Irish subsidiaries comply with European Union rules on State aid.

“If the European Commission were to take a final decision against Ireland, it could require changes to existing tax rulings that, in turn, could increase the company’s taxes in the future. The European Commission could also require Ireland to recover from the company past taxes reflective of the disallowed State aid.”

Apple told shareholders that its tax affairs are also being examined by the IRS in the US.

“There can be no assurance as to the outcome of these examinations. If the company’s effective tax rates were to increase, particularly in the US or Ireland, or if the ultimate determination of the company’s taxes owed is for an amount in excess of amounts previously accrued, the company’s operating results, cash flows and financial condition could be adversely affected.”

Apple Store in New York image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years