Apple wins tax appeal over EU regulators

LONDON — Apple won a major legal victory against European antitrust regulators on Wednesday when a European court overruled a 2016 decision that ordered the company to pay $14.9 billion in unpaid taxes to Ireland.

The decision, which can be appealed to the European Union’s top court, is a setback for the region’s efforts to clamp down on what authorities there believe is anti-competitive behavior by the world’s largest technology companies. Google and Amazon have other court appeals pending as they seek to overturn decisions that they broke European competition laws.

The Apple case stems from the company’s use of Ireland as its base for its European operations. In 2016, the European Union’s top competition regulator said Apple had used illegal deals with the Irish government to reduce the taxes it owed on profits from the sales of Apple products in the European Union.

The EU Commission said Apple used two shell companies in Ireland to report its Europe-wide profits at effective tax rates of well under 1%. In 2011, for instance, regulators said Apple’s Irish subsidiary recorded European profits of $22 billion, but only about $57 million was considered taxable in Ireland.

Authorities said the arrangement amounted to an illegal subsidy not available to Apple’s competitors, and it ordered Ireland to recover 10 years of back taxes.

Apple and Ireland appealed the judgment, arguing that the structures were consistent with existing tax laws. Apple called the effective tax rate used by the European regulators ‘‘a completely made-up number.’’ Tim Cook, Apple’s chief executive officer, called the punishment ‘‘total political crap.’’

The appeal has put Ireland in the unusual position of opposing the collection of billions in taxes at a time when its government faces a budget deficit, a result of emergency spending responding to the pandemic. The country, which has long faced criticism from other countries for its corporate tax policies, argued that its appeal was a defense of Ireland’s independence.

‘‘Ireland has always been clear that there was no special treatment,’’ Ireland’s Department of Finance said in a statement. ‘‘The correct amount of Irish tax was charged in line with normal Irish taxation rules.’’

Apple praised the court’s decision. The company has said that because its products and services are made in the United States, that is where it books much of its taxable income.

‘‘This case was not about how much tax we pay, but where we are required to pay it,’’ said Josh Rosenstock, a company spokesman. ‘‘We’re proud to be the largest taxpayer in the world, as we know the important role tax payments play in society.’’

Apple has used Cork, Ireland, as its home in Europe since 1980. The company employs about 6,000 in the country in areas including logistics, distribution and customer support.

Other U.S. tech giants such as Google, Facebook and Twitter followed Apple into Ireland, drawn to using an English-speaking country with favorable corporate tax policies as a base for operations across Europe. Their large office buildings have taken up parts of Dublin; an area along the city’s canal is known as Silicon Docks.

Google is appealing three antitrust decisions that amount to fines of about $9.4 billion. Amazon is appealing a 2017 ruling that it owes Luxembourg $285 million in unpaid taxes.