Apple Inc.’s (AAPL) shares are taking a hit in premarket trading on Tuesday, following the company’s unveiling of new iPhone, Apple Watch, and AirPods models. The decline comes on the heels of a major legal decision from the European Union’s Court of Justice. The court has upheld the European Commission’s 2016 ruling that Ireland must recover up to €13 billion ($14.4 billion) in back taxes from Apple. The court determined that Apple received “illegal” tax benefits from Ireland spanning two decades.
The court stated that Ireland granted Apple unlawful aid that it is now required to recover. This ruling refers to Ireland’s 1991 and 2007 tax rulings in favor of two Apple group companies incorporated in Ireland. Notably, these companies were not tax residents in the country. The EU Court of Justice ruled that the incredibly low corporate tax rates (as low as 0.005%) paid by Apple amounted to an unlawful subsidy. This ruling overturns a previous decision made by the General Court in 2020.
In a separate but related development, the EU’s highest court also upheld a €2.4 billion ($2.65 billion) fine imposed on Alphabet, Inc. (GOOGL GOOG) for abusing its dominant position in online search markets. The fine was initially levied in 2017 by the European Commission, which argued that Google favored its own comparison shopping service over those of its competitors. After the General Court upheld the fine in 2020, Google and Alphabet appealed the decision.
As a result of these legal rulings, Apple’s shares fell by 1.38% to $217.86 in premarket trading, while Alphabet’s Class A shares declined by 0.46% to $148.02. The legal implications of these decisions could have significant ramifications for both companies, potentially influencing future tax strategies and competition in the tech industry.
