Apple could be on the hook for €1 billion in interest on its Irish tax bill

EU Commissioner Margrethe Vestager has led effort to investigate Apple's tax situation in Ireland.

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EU Commissioner Margrethe Vestager has led effort to investigate Apple’s tax situation in Ireland.
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Thomson Reuters

    Ireland will collect billions of euros from Apple in the next year as a “state-aid” penalty. That penalty will include about €1 billion in interest, Apple revealed in a SEC filing

In addition to paying Ireland some €13 billion in back taxes, Apple will also have to fork over another €1 billion in interest as part of its penalty for violating Europe’s “state-aid” rules, the iPhone maker has disclosed in a regulatory document.

Ireland is still ‘computing’ the tax bill the EU wants it to collect from the iPhone maker, Apple said in its annual report, which it filed with the Securities and Exchange Commission on Friday. Apple’s previous estimates of the amount it would have to pay Ireland did not include any estimate for interest. The new tallies amount to about $15 billion for the recovery amount and $1.16 billion in interest.

“Although Ireland is still computing the recovery amount, the company expects the amount to be in line with the European Commission’s announced recovery amount of €13 billion, plus interest of €1 billion,” Apple said in the annual report.

When Ireland does finalize the amount of taxes it needs to collect from Apple, the iPhone company plans to pay the amount out of its massive stores of foreign cash and place the balance in escrow. That is expected to happen in 2018, according to Apple’s report.

Last year, the European Commission found Apple to be in violation of European “state-aid” rules. Essentially, it ruled that Apple had received special treatment – unfair deals from Ireland – that allowed it to pay an effective corporate tax rate of just 1%.

Ireland hasn’t exactly been eager to collect Apple’s taxes, and the Irish government has looked for money managers to invest the tax money while it’s in escrow, Bloomberg reported.

It hasn’t been clear until now how much interest Apple would have to pay on the outstanding taxes. Some estimates of have ranged as high as €6 billion. However, Luca Maestri, Apple’s chief financial officer, told Irish journalists in 2016 that he believed the interest “is going to be a significantly lower number.”

Appeals over the case are still ongoing and could take as long as five years. If Apple wins, Ireland may have to return the entire penalty.