Apple May Face Double Tax on Profits If France Adds to Tab

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By Rick Mitchell and Ben Stupples

Sept. 12 — Apple Inc. may face double taxation on some of its profits if the European Commission’s Aug. 30 ruling inspires France to slap its own tax adjustment on the company, practitioners said.

Apple could even face “triple taxation” if it repatriates profits from the European Union to the U.S., Laurent Leclercq, a partner at Paris-based law firm Fidal, told Bloomberg BNA.

The commission Aug. 30 ordered Ireland to recover 13 billion euros ($14.5 billion) from Apple related to favorable Irish tax rulings that the commission deemed illegal anti-competitive state subsidies, and invited other nations to consider whether profits that flowed through Apple's nonresident Irish branch should instead be taxed in their nations (169 TMIN, 8/31/16).

Ireland has since said it will appeal the decision.

French Finance Minister Michel Sapin on Sept. 9 called the decision against Apple “completely legitimate” but left the door open to assessing back tax on the company. “The French policy on tax is that of applying French law and for companies to pay in line with what the reality of the profits made in the country are,” Sapin told reporters after a meeting of European finance ministers in Bratislava, Slovakia.

Eye on Internet Companies

The French government has had its eye on Apple and on other internet multinationals. In 2015, the government issued a report calling on governments around the world to devise a better system on internet company profits from data flows as a replacement for what it called “obsolete” transfer pricing and territory-based taxation (48 TMIN, 3/12/15). Inc. revealed in 2013 that it was contesting a French assessment of $252 million in back taxes and in May, French officials raided Google's Paris offices, intensifying a probe seeking to verify whether Google's Inc.'s Irish unit has a permanent establishment in France.

Leclercq, who doesn't represent Apple, said that if the tech giant were to receive a tax adjustment from France on grounds that part of the profits it declared in Ireland should have been declared in France, that could “theoretically” make it possible for Apple’s Ireland branch to decrease the amount of taxable profits it has to initially allocate to Ireland, assuming the commission's state-aid decision is confirmed on appeal.

He said that is because the tax treaty between Ireland and France and the EU Arbitration Convention allows for elimination of double taxation on the same profits. However, that reduction wouldn't be automatic, especially if the French tax authorities added “bad faith penalties” to the adjustment.

“It’s going to be Ireland that has to recover the money from the EC decision” from Apple’s Irish unit, said Leclercq, adding that if the Irish company is also hit by a tax reassessment in France, “the risk of double taxation would be clear.”

And if Apple repatriates EU profits to the U.S., as it has said it plans to do, there is also a risk of “triple taxation,” if the U.S. declines to give Apple credit for the “state aid” repaid to the Irish government against the U.S. corporate income tax rate, Leclercq said.

“It is interesting to note that this repayment would not legally qualify as a tax reassessment but as a repayment of a subsidy,” he said.

Physical Stores

Gaelle Menu-Lejeune, also of Fidal in Paris, said Apple’s case differs from Google’s in that it has several physical stores in the country, whose sales are taxed differently from virtual stores. “But little is known about Apple’s tax structure in France,” she said.

Leclercq said a big difference is that “internet pure players like Google often get revenue and book invoices from a single place, and not in each country where their websites or tools are accessible.” In Apple’s case, sales for the physical stores are necessarily booked in France. “So a tax authority looking at those sales would ask how much profit France gets from those sales, and whether reductions are linked to equipment purchases, royalties, services and and so on,” Leclercq said.

Apple and the French government declined Bloomberg BNA requests for comment.

Weak Legal Grounds

Manon Aubry, an advocacy adviser at Oxfam France, told Bloomberg BNA that French tax investigations must be launched by the finance ministry, which makes such probes much more political than they would be, had they been initiated by the justice ministry.

French authorities also have a much better record of going after individual tax dodgers than after corporate tax evaders, she said.

Richard Murphy, a U.K. chartered accountant and economist who campaigns for and researches tax transparency, said Italy and Spain are investigating Apple’s tax practices. “Considering what French authorities have done with Google, I’m astonished that France isn’t going after Apple,” he said.

New country-by-reporting rules from the Organization for Economic Cooperation and Development's base erosion and shifting project could make it easier to prove that multinationals like Apple aren't properly paying taxes in the countries where they are making profits, Murphy said.

Spanish Inquiries

Spain’s tax authorities, meanwhile, are already handling three cases involving Apple’s Spanish business, focusing on nonresident tax, corporation tax and value-added tax payments, Leon Fernando Del Canto, a Madrid-based managing partner and barrister at global law firm Del Canto Chambers, told Bloomberg BNA.

“They have more than 1,000 employees and a strong management structure in Spain, so the Spanish authorities are asking: ‘Why is over 90 percent of your billing coming from Ireland?’ ” Del Canto said, referring to how Apple books its profits in the context of the OECD’s new BEPS regulations.

Apple’s media office in Spain didn't respond to a Bloomberg BNA phone call or e-mailed request for comment. A spokesman for Agencia Tributaria, Spain’s tax authority, declined to comment as well.


Germany is unlikely to pursue retrospective tax payments from Apple.

Bavarian Finance Minister Markus Soder has already said he doesn’t expect additional payments for the state after the Ireland ruling, according to Markus Meinzer, a Marburg, Germany-based director at Tax Justice Network.

“Soder is the decision-maker here, and his statements carry a lot of weight—if Soder says he doesn't want to open up a tax audit on Apple, then there probably won't be one,” Meinzer said.


In December 2015, Apple paid 318 million euros to settle with Italy’s tax authority after it ruled that the company had booked 880 million euros in profits to an Irish subsidiary from 2008 to 2013.

Italian Finance Minister Pier Carlo Padoan declined to address the merits of the Apple ruling specifically during a Sept. 2 television interview in Cernobbio, but said the case shows the hazards of the euro area’s patchwork of national tax systems.

“This episode signals very badly the need to find a more coordinated approach to taxing policy and taxing instruments in Europe which are still lacking,” Padoan said. “This is the lesson I would draw and I would share with my European colleagues.”

After the Americas and Greater China, Europe is the third-largest market for Apple by revenue, with $50.4 billion coming from the region last year, according to the company’s 2015 annual report.

With assistance from Jabeen Bhatti in Berlin.

To contact the reporters on this story: Rick Mitchell in Paris at and Ben Stupples in London at

To contact the editor responsible for this story: Penny Sukhraj at

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