Apple wins major tax battle against EU

The bloc’s second-highest court sided with the tech giant over allegedly unpaid taxes to Ireland

Apple Inc. won a major battle with the European Union, when the bloc’s second-highest court on Wednesday sided with the U.S. company over a €13 billion ($14.8 billion) tax bill that EU antitrust officials had said the company owed to Ireland.

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The case stems from a 2016 decision by the European Commission, the bloc’s top antitrust enforcer, which said that Ireland must be paid €13 billion in tax breaks from between 2003 and 2014, money the commission said constituted an illegal subsidy under the bloc’s strict state-aid rules.

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But in its judgment on Wednesday, the General Court said it annulled the commission’s decision because it had failed to meet the legal standards in showing that Apple was granted illegal subsidy.

The decision earned then-competition commissioner Margrethe Vestager the nickname “tax lady” from President Trump. Ms. Vestager is still in charge of the bloc’s competition law enforcement and recently launched two antitrust probes into Apple. She is now also responsible for tech regulation and is considering imposing a digital tax on tech giants.

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The European Commission can still challenge this ruling at the bloc’s top court, the European Court of Justice. In recent comments, Ms. Vestager however pointed to the limitations of state aid law in enforcing what she describes as “paying your fair share of tax.”

In a September hearing at the General Court, Apple lawyers said the commission’s decision “defied reality and common sense” and Apple’s CEO Tim Cook at the time slammed the decision as “total political crap.”

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The company however had parked the sum in an escrow account, pending adjudication in EU courts.

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The case was Ms. Vestager’s first major taxation decision in a series of cases she brought against Amazon.com Inc., Starbucks Corp., Nike Inc., Fiat Chrysler Automobiles NV and Engie SA of France. So far, the General Court has sided only with Starbucks in a taxation case brought by Ms. Vestager. Amazon in March had argued at the General Court that Ms. Vestager’s 2017 order to pay Luxembourg $277 million in allegedly unpaid taxes was riddled with legal and factual errors.

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Write to Valentina Pop at valentina.pop@wsj.com and Sam Schechner at sam.schechner@wsj.com