Apple will start paying $21 billion in back taxes to Ireland

Chip Somodevilla/Getty ImagesApple CEO Tim Cook
  • Apple was hit by the European Commission with a $21 billion bill for back taxes in 2016.
  • It’s starting to pay the funds into an escrow account.
  • Apple will appeal the ruling.

It’s time for Apple to pay the tax man.

Apple has to pay €13 billion, or about $21 billion, as part of a record-breaking back tax judgment from August 2016.

Basically, the European Commission, led by Margrethe Vestager, said that Apple had received special treatment from Ireland that ended up cutting its tax bill by billions between 2003 and 2014.

Here’s an EU graphic that shows how Apple was able to have a large amount of revenue that wasn’t taxed in any jurisdiction – even Ireland, where Apple subsidiaries were based.

Apple state aidEuropean Commission

Now Ireland will collect the penalty, it said on Tuesday, although there’s still a chance Apple could get the money back. Both Apple and Ireland are appealing, and that process is likely to begin this fall, Irish Finance Minister Paschal Donohoe said on Tuesday, according to Reuters and the Financial Times. Donohoe said he “fundamentally disagrees with the ruling,” but will collect it regardless.

“We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid,” Apple CEO Tim Cook said in a 2016 letter.

In the meantime, the money will be held by an escrow account, Donohoe said. Apple will start making payments this quarter, with all of the funds in the escrow account by the end of the third quarter. Additional interest will be calculated after the first €13 billion is collected.

Apple shouldn’t be sweating the fine, even though it’s huge. Apple said it had already set aside the money, and the company still has $US285.1 billion in cash and marketable securities, according to its last earnings report.

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