Apple Win EU Tax Rulings Appeal
Finally, after 4 years in the making with EU authorities, the Irish Government and Apple win EU tax rulings appeal. This appeal was against a decision by a previous European Commission over how Apple is taxed in Ireland. On the 15th of July 2020, the General Court of the European Union pronounced that two tax rulings granted by the Irish government to Apple in 1991 and 2007 were in fact lawful.
It was clear from the outset that for Apple the stakes were high. This decision was worth around €13bn in back taxes alone, as well as the interest of a further €1.2bn. From an Irish Government perspective, this ruling is a vindication of it’s approach to tax with the General Court agreeing with Ireland, who has said from the outset that rulings for Apple were not some sort of “a sweetheart deal”.
Apple Tax Rulings
The case against Ireland and Apple was centred around the notion that two tax rulings which the Irish government had granted Apple had a selective tax advantage amounting to illegal state aid under article 107 of the Treaty on the Functioning of the EU (TFEU).
According to the EU, the sales operations Apple set up in Europe meant that customers were contractually buying products from Apple Sales International (ASI) in Ireland, as opposed from shops that physically sold the products to EU customers. Apple’s branches in Ireland would then send fund to the US each year to finance research and development there.
The two tax rulings by the Irish Government concerned the internal allocation of profits within ASI, which the EU claimed endorsed a split of the profits for tax purposes in Ireland.
The European Commission, in stating its case, claimed that the tax rulings issued endorsed an artificial allocation of profits and that these had “no factual or economic justification”. Therefore giving Apple a selective tax advantage.
The European Commission was then tasked with proving that firstly a “selective tax advantage” existed and secondly, that Irish authorities had granted Apple a more attractive tax treatment than what was available under domestic law which was not available to other companies. This would therefore distort competition within the EU.
The General Court in its ruling for Ireland (Case T-778/16) and Apple’s Irish branches (Case T-892/16), the General Court of the European Union agreed to annul the Commission’s decision.
It General court ruled that the Commission was unsuccessful in showing there was an advantage relative to Article 107(1) TFEU. The General Court also ruled that the Commission was wrong to declare that the Irish branches had been granted a selective economic advantage, and, by extension, State aid.
Furthermore, which is pleasing news for our corporate tax regime in Ireland, the court said the Commission failed to demonstrate that the Irish tax ruling was flawed in how it was drafted. It was stated by the court: “Although the General Court regrets the incomplete and occasionally inconsistent nature of the contested tax rulings, the defects identified by the Commission are not in themselves, sufficient to prove the existence of an advantage for the purposes of Article 107(1) TFEU”
Lastly, the Court also stated that the Commission had failed in their attempt to prove that the tax rulings were the result of discretion exercised by the Irish tax authorities to give the Irish branches a selective advantage.
The Irish Government welcomed the news and ruling from the General court stating; “Ireland has always been clear that there was no special treatment provided to the two Apple companies… the correct amount of Irish tax was charged in line with normal Irish taxation rules. Ireland appealed the Commission decision on the basis that Ireland granted no State aid and the decision today from the Court support that view.”
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