Apple Inc (NASDAQ:AAPL) has won a major victory over the European Union after the bloc’s second-highest court ruled it will not have to pay €13bn (£11.6bn) in back taxes as it had not broken competition laws.
The European Commission, which originally brought the case, demanded the iPhone maker pay the money for tax incurred in Ireland following a ruling in 2016 which found that the company had been given illegal tax breaks by the Irish government.
The Commission also claimed that Ireland had allowed Apple to attribute nearly all of its Eu earnings to its head office in the country, despite existing only on paper and effectively avoiding taxes across other member states.
The regulator said this effectively amounted to Ireland providing state aid to Apple in violation of EU rules.
But the EU's General Court said there was not enough evidence to prove that Apple had received state aid or lowered the amount of tax owed, although it gave a 14-day window for an appeal to the European Court of Justice (ECJ), the EU’s highest court.
Margrethe Vestager, the EU Competition Commissioner, said she would "study the judgment and reflect on possible next steps".
A statement by Apple said the case is about how it is required to pay tax.
“We're proud to be the largest taxpayer in the world as we know the important role tax payments play in society."
The Irish government had also appealed against the original decision and said it had "always been clear" Apple received no special treatment.
However, the issues between Apple and the EU may not be entirely settled, as last month EU antitrust regulators launched a probe against the firm saying the terms and conditions in the company’s App Store and Apple Pay functions may be violating the trade bloc’s rules on competition.
A blow to regulators
The ruling, if it is not appealed and overturned in the ECJ, will be a major blow for EU regulators and Vestager as they try to clamp down on numerous bespoke tax deals for major corporations in EU member states.
Similar cases against Swedish furniture maker Ikea and sportswear brand Nike are due to be ruled on soon, while the EU is also rumoured to be considering charges against e-commerce giant Amazon Inc (NASDAQ:AMZN) for anti-competitive activity.
Shares in Apple rose 1.5% to US$394 in pre-market trading in New York on Wednesday.
--Adds details and share price--