A big bite of apple

Daniel Roules, Linda Pfatteicher and Mitch Thompson analyze how the EU state aid case against Apple is causing concern for Chinese and other investors around the world

The recent release by the European Commission (EC) of its decision in the high-profile European Union (EU) state aid case against Apple shocked many around the world, especially those in China and elsewhere outside the EU, despite indications for months that this ruling would involve a significant tax assessment. The magnitude of the judgment – an astonishingly high US$14.5 billion in tax, plus interest – has created a seismic wave of uncertainty for taxpayers investing into the EU who have, for years, felt they knew what their tax outcomes would be. The decision bears implications for Chinese and other investors.

The EC has made targeted efforts in connection with state aid cases since 2013, the year in which Apple was first notified of the EC’s investigations. On 30 August this year, the EC released a detailed press release describing its decision that Apple had received an unfair advantage over other businesses by the terms of its Irish tax rulings. As the EC is only permitted to order recovery of illegal state aid for the 10 years preceding the date of first inquiry, the EC found that, from 2003 to 2013, Apple had been given preferential state aid in the form of its tax rulings from Ireland.

Daniel Roules is a partner in Shanghai at Squire Patton Boggs. Linda Pfatteicher and Mitch Thompson are partners in San Francisco and Cleveland, respectively, at Squire Patton Boggs