The European Court of Justice (ECJ) has ruled that Apple must pay €13 billion in back taxes to Ireland, marking the conclusion of a decade-long battle over the company’s tax practices. This ruling supports the European Commission’s original 2016 decision that Apple received “illegal” tax benefits from Ireland over a span of two decades.

The decision, which comes just hours after Apple announced a new range of products, overturns an earlier verdict by the EU’s General Court in 2020 that had sided with Apple. In response to the ruling, Apple reiterated that its income was already taxed according to international laws in the U.S. The Irish government, which had opposed the 2016 ruling, emphasized that the case is now of “historical relevance” and maintained that it does not offer preferential tax treatment to any company.

Following the ECJ’s decision, Ireland will now begin transferring the assets held in escrow to the Irish government. Apple’s shares dropped by 1% in premarket trading in London after the announcement.

The dispute began in 2014 when the European Commission launched an investigation into Apple’s tax arrangements with Ireland, where the company has its European headquarters. By 2016, the Commission ordered Ireland to recover €13 billion in back taxes from Apple, accusing the country of granting “illegal” tax advantages that amounted to state aid. Both Apple and Ireland challenged the decision, and in 2020, the EU’s General Court annulled the Commission’s ruling, arguing that the Commission had failed to prove that Apple received a selective advantage.

However, the Commission appealed the ruling, leading the case to the ECJ. On Tuesday, the ECJ upheld the 2016 decision, reinforcing the Commission’s stance that Apple’s tax arrangements in Ireland were unlawful.

This ruling underscores the ongoing tensions between the EU and U.S. tech companies over issues ranging from data protection to antitrust and taxation. Apple has faced multiple legal challenges in the EU, including a €1.8 billion fine in March for abusing its market dominance in the distribution of music streaming apps. Moreover, the EU’s Digital Markets Act (DMA) has forced companies like Apple, Alphabet, and Meta to alter their practices within Europe, further illustrating the regulatory pressure on Big Tech.

How does this impact Apple?

The European Court of Justice’s ruling that Apple must pay €13 billion in back taxes has several significant impacts on the company:

1. Financial Impact

While Apple has the resources to cover the €13 billion payment, the ruling still represents a significant financial hit. Though the funds are currently in escrow, this payment reduces Apple’s available liquidity. It also adds legal and tax-related costs as Apple may need to further adjust its tax strategies and operations within Europe. This payment could also set a precedent for future tax-related disputes.

2. Reputational Damage

Apple, which prides itself on its image of innovation and corporate responsibility, risks reputational harm from being seen as exploiting tax loopholes. The ruling may negatively affect its public image, as the EU has framed the issue as Apple receiving “illegal” tax advantages, putting the company in the spotlight as a corporate actor that avoids paying its fair share of taxes.

3. Regulatory Scrutiny

The case underscores Apple’s continued friction with European regulators. The EU is increasingly assertive in its stance against tech giants, as demonstrated by the Digital Markets Act (DMA) and antitrust actions. Apple may face additional regulatory scrutiny not only in taxation but also in competition law and data privacy, forcing it to continually adapt its business model in Europe.

4. Strategic Shifts in Global Tax Practices

This ruling could prompt Apple to rethink its tax strategy and global operations, particularly within the EU. The company may choose to relocate certain business activities, restructure its European operations, or seek new agreements in countries with more favorable tax policies. It could also encourage other countries to review Apple’s tax filings and close loopholes.

5. Investor Confidence

The ruling has already led to a slight decline in Apple’s stock price, reflecting concerns among investors about the company’s exposure to future legal and regulatory challenges. While Apple remains financially strong, ongoing regulatory battles in Europe could create uncertainty and weigh on investor sentiment, especially if similar cases arise in other regions.

6. Precedent for Other Tech Giants

This decision could set a broader precedent, impacting not only Apple but other major multinational tech companies. The EU’s aggressive approach to taxation may lead to similar cases against other firms that use complex tax structures to reduce their tax burden, increasing compliance costs across the tech industry.

The ECJ’s decision is a significant victory for the European Commission in its broader efforts to hold tech giants accountable for their tax arrangements. As global scrutiny over corporate tax practices continues, Apple and other major companies will likely face further challenges in balancing compliance with diverse international tax laws.