Apple Expects 'Material' Tax Repercussions From European Commission Tax Probe

Apple Inc. (NASDAQ: AAPL) on Wednesday disclosed in a 10Q filing that it expects "material" tax repercussions if the European Commission rules against Ireland in an investigation over alleged state aid to the company.

As noted in Apple's 10Q filling, on June 11, 2014, the European Commission issued an opening decision initiating a formal investigation against Ireland for alleged state aid to Apple. The opening decision concerns the allocation of profits for taxation purposes of the Irish branches of two subsidiaries of the Company.

Apple noted that the European Commission's assertions are "without merit" but nevertheless if the Commission were to conclude against Ireland, the European Commission could require the country to recover from Apple past taxes covering a period of up to 10 years.

"While such amount could be material, as of March 28, 2015 [Apple] is unable to estimate the impact," the company disclosed.

Apple warned that it could be subject to changes in its tax rates, the adoption of new U.S. or initial tax legislation or exposure to additional tax liabilities.

Apple further stated: "The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland, where a number of the Company's subsidiaries are organized. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. The Company's future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation, including in the U.S. and Ireland."

Shares of Apple traded recently at $129.03, down 1.1 percent.