DUBLIN: Apple has warned investors that it could face “material” financial penalties from the European Commission’s investigation into its tax deals with Ireland the first time it has disclosed the potential consequences of the probe.
Under US securities rules, a material event is usually defined as 5 per cent of a company’s average pre-tax earnings for the past three years. For Apple, which reported the highest quarterly profit ever for a US company in January, that could exceed $2.5bn, according to FT calculations.
The warning came in Apple’s regular 10-Q filing to the Securities and Exchange Commission on Tuesday, a day after it reported first-quarter revenues of $58bn and net income of $13.6bn.
Brussels has the power to order Dublin to reclaim 10 years of tax advantages granted to Apple if it finds that deals struck in 1991 and 2007 were unlawful.
Both the Irish government and Apple have consistently denied any wrongdoing and declined to comment on the size of any fine. However, some Brussels officials suggest any ruling could set a new record for a state-aid investigation penalty by comfortably topping €1bn.
Apple said in the filing: “If the European Commission were to conclude against Ireland, it could require Ireland to recover from the company past taxes covering a period of up to 10 years reflective of the disallowed state aid, and such amount could be material.”
Apple did not have any further comment on its filings, but in an interview last year Apple finance chief Luca Maestri told the FT: “It’s very important that people understand that there was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland.”
Ireland defends its national tax policy and has said that it will appeal immediately to the European Court of Justice if the decision goes against it.
