Apple is due to head to the European Union General Court over its tax affairs this week, with the iPhone maker set to commence arguments on Tuesday to reverse a ruling by the European Commission that caused it to pay Ireland 13 billion euros ($14.4 billion) in back taxes.
Apple's Irish headquarters
The date for the showdown between the regulator, Ireland, and Apple was set in mid August, with the appeal set to take place on Tuesday and Wednesday at the second-highest tribunal on the continent. While a final ruling on the matter may take months to arrive, the first signs of Apple's fate will be via a pair of initial rulings set for publication on September 24.
The courtroom tussle is over a 2016 ruling by the European Commission claiming Apple was provided preferential tax breaks by Ireland, including one rate as low as 1% on European profits in 2003, and as little as 0.005% in 2014. Through a financial process commonly called the "double Irish," Apple funneled its European revenue through Ireland to take advantage of the rates.
The European Commission's decision led to an order for Apple to pay 13.1 billion euro to Ireland, along with 1.2 billion extra in interest. Naturally, both Apple and Ireland opposed the ruling.
Neither Apple nor the European Commission offered a comment to Fortune ahead of the hearing, with Ireland advising it "profoundly" disagreed with the fine. Apple did however refer to comments it previously made about its tax payments, including a statement made in November 2017, insisting it complies with tax laws and that it was the largest taxpayer in the world, spending over $35 million in corporate income taxes over a three-year period.
Under EU rules, preferential tax treatment like the rates provided to Apple is forbidden, including in cases where individual member states offered companies benefits not available elsewhere in the European Union.
The total balance of 14.3 billion euros has been retained in escrow throughout the appeals process and will remain so until its completion, in case it has to be return to Apple, though so far the escrow account has lost 16 million euro in value despite it being invested in typically safe sovereign and quasi-sovereign bonds.
Regardless of the result of the hearing, it is possible the major tax battle could go on for years longer, with it potentially being sent to the EU Court of Justice, the continent's highest tribunal.
Outside of Apple, the courtroom fight has the potential to affect other multinational companies that have become targets of the European Commission for tax reasons. A win to the European Commission could embolden it to conduct further investigations, and possibly more fines to be paid.
According to European Parliament member Sven Giegold, the legal activity has "very big consequences" on a political level, suggesting "If Apple wins this case, the calls for tax harmonization in Europe will take on a different dynamic, you can count on that."
So far, individual member states like France and Austria have explored the possibility of applying extra tax measures against major tech companies, but work to produce Europe-wide tax reform is moving at a far slower pace.