Apple Inc. (NASDAQ:AAPL) is being investigated by European authorities about whether the company’s corporate income tax arrangements in Ireland are legal or whether they are considered unlawful state aid. Many tech companies are using Ireland as their top choice for lowering corporation tax rates and for favorable laws, which enable complex avoidance like the Double Irish arrangement.
In October 2013, Ireland Finance Minister Michael Noonan announced an end to “ghost companies” in January 2015, which is used for tax avoidance. This arrangement is being shutdown in January 2015 after U.S. lawmakers complained about Apple paying almost no corporation tax anywhere. However, the Irish authorities ruled in Apple’s favor and confirmed that it could continue with its transfer pricing schemes. The European Commission also opened similar probes in regards to Luxembourg, the Netherlands, car company Fiat, and Starbucks.
Here is what the European government wrote in a statement:
If tax authorities, when accepting the calculation of the taxable basis proposed by a company, insist on a remuneration of a subsidiary or a branch on market terms, reflecting normal conditions of competition, this would exclude the presence of state aid. However, if the calculation is not based on remuneration on market terms, it could imply a more favourable treatment of the company compared to the treatment other taxpayers would normally receive under the Member States? tax rules. This may constitute state aid.