The European Commission [official website] ruled [press release] on Tuesday that Ireland may recover up to €13 billion from Apple [corporate website] after the company benefited from undue tax breaks. The commission ruled the tax breaks were illegal based on EU law because the tax benefit meant that Apple paid less taxes to operate in the country than other businesses, resulting in an unfair economic advantage. The ruling is the result of an investigation going back to June 2014 [case summary]. The investigation found that the structure [NYT backgrounder] of Apple Sales International and Apple Operations Europe was set up in a way that essentially allowed them not to pay taxes on their profits by allowing a head office that had no employees or daily business dealings to have responsibility for the profits.

Member States cannot give tax benefits to selected companies—this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014

The actual amount of the recovery is still being determined based on the company’s business dealings with other European entities.

The ruling is another setback for the communications company, which continues to face multiple legal issues. The Beijing Municipal High People’s Court ruled in May that Xintong Tiandi (XT), a local leather goods retailer, can continue to use the phrase “iPhone” on its leather goods in a trademark case [JURIST report]. The Beijing Intellectual Property Bureau ordered Apple to stop sale of the iPhone 6 and iPhone 6 Plus in Beijing due to claims by Chinese regulators that Apple Inc. violated a patent held by a Chinese company in June[JURIST report]. Apple agreed in July to a $25 million settlement with Network-1 Technologies to end a patent infringement claim [JURIST report].