Apple Wins $15 Billion European Court Ruling On Irish Taxes

Apple Inc. (AAPL) will not need to pay back 13 billion euros ($15 billion) in taxes to Ireland according to a decision by the General Court of the European Union.

Shares rose 1.9% to $395.48 in Wednesday’s pre-market trading after the European court ruled in favor of Apple and annulled a 2016 ruling from the European Commission.

Four years ago, the European Commission ruled in an order that Apple received illegal state aid via two Irish tax rulings that artificially reduced its tax burden and demanded the recovery of the aid in question. According to the Commission’s calculations, Ireland had granted Apple 13 billion euro in unlawful tax advantages.

“By today’s judgment, the General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage,” the European court said in a statement. “The Commission was wrong to declare that [Apple] had been granted a selective economic advantage and, by extension, State aid.”

The court decision concluded that the Commission did not succeed in demonstrating, in its subsidiary line of reasoning, methodological errors in the contested tax rulings which would have led to a reduction in Appl’s chargeable profits in Ireland.

“This case was not about how much tax we pay, but where we are required to pay it,” Apple said in a statement following the ruling. “We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society.”

Apple stock is up 32% this year with a Strong Buy consensus that boasts 25 Buy ratings from analysts. Meanwhile, the $362.88 average price target indicates 6.5% downside potential in the shares over the coming year. (See Apple stock analysis on TipRanks).

Not for Needham analyst Laura Martin who today raised the stock’s price target to $450 (16% upside potential) from $350 and maintained a Buy rating. She cited Apple’s unique strategic position as an aggregator of 950mm wealthy consumers globally.

Other reasons for stock optimism for Martin include “rising lifetime value (LTV) and falling churn driven by services and ancillary product growth and structural demand for shares by AAPL as they try to buy shares worth approximately $90B of net cash plus $60-80B of annual FCF.”

“AAPL’s privacy philosophy dovetails global regulators,” Martin wrote in a note to investors. “We believe AAPL is best equipped to navigate regulatory scrutiny among the global aggregation platforms.”

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