The Court of Justice of the European Union has overturned the General Court’s 2020 ruling in the Apple State Aid case. The decision reinstates the European Commission’s 2016 ruling that Ireland provided illegal State Aid to Apple and confirms that the company should repay €13bn in taxes to Ireland.
Explaining the background to the judgment, Heather Self, tax consultant at Blick Rothenberg, said: ‘Ten years ago, in June 2014, the EU Commission announced an investigation into rulings issued by Irish tax authorities on the calculation of the taxable profits allocated to the Irish branches of two companies, Apple Sales International (ASI) and Apple Operations Europe (AOE). ASI and AOE were incorporated, but not tax resident, in Ireland. In both cases, the Irish branches declared low profits, claiming that the profits relating to intellectual property were attributable to the head office and not taxable in Ireland. However, due to the interaction of Irish and US tax rules at the time, the profits were not taxed anywhere.
Self said: ‘In a decision in 2016, the Commission said that the rulings allowed profits from 1991 to 2014 to be calculated in a way “that did not correspond to economic reality” and said that this was State Aid. They ordered Ireland to recover €13bn from Apple. Both Ireland and Apple appealed, and in 2020 the General Court annulled the Commission’s decision, holding that the Commission had not sufficiently established that ASI and AOE enjoyed a selective advantage. The Commission appealed to the Court of Justice (ECJ).
‘On 10 September 2024, the ECJ issued its final ruling,' Self said. 'The decision of the General Court has been overturned, and the Commission’s original decision has been upheld. In particular, the ECJ held that the Commission was correct to compare the activities of the Irish branches with the head offices of ASI and AOE, and not to take into account the activities of other group companies such as Apple Inc.
Self added: ‘This is an important decision, even though it deals with events from some years ago and the Irish rules on tax residence have now been updated. In particular, the US warned in 2016 that the EU risked damaging international agreements on tax reform if it continued to act as a “supra-national tax authority”. The ECJ’s decision that Europe should collect tax of this magnitude from Apple may push the US towards finally implementing the OECD’s proposed reforms – or could have the opposite effect of causing Pillar One to collapse altogether.'
The Court of Justice of the European Union has overturned the General Court’s 2020 ruling in the Apple State Aid case. The decision reinstates the European Commission’s 2016 ruling that Ireland provided illegal State Aid to Apple and confirms that the company should repay €13bn in taxes to Ireland.
Explaining the background to the judgment, Heather Self, tax consultant at Blick Rothenberg, said: ‘Ten years ago, in June 2014, the EU Commission announced an investigation into rulings issued by Irish tax authorities on the calculation of the taxable profits allocated to the Irish branches of two companies, Apple Sales International (ASI) and Apple Operations Europe (AOE). ASI and AOE were incorporated, but not tax resident, in Ireland. In both cases, the Irish branches declared low profits, claiming that the profits relating to intellectual property were attributable to the head office and not taxable in Ireland. However, due to the interaction of Irish and US tax rules at the time, the profits were not taxed anywhere.
Self said: ‘In a decision in 2016, the Commission said that the rulings allowed profits from 1991 to 2014 to be calculated in a way “that did not correspond to economic reality” and said that this was State Aid. They ordered Ireland to recover €13bn from Apple. Both Ireland and Apple appealed, and in 2020 the General Court annulled the Commission’s decision, holding that the Commission had not sufficiently established that ASI and AOE enjoyed a selective advantage. The Commission appealed to the Court of Justice (ECJ).
‘On 10 September 2024, the ECJ issued its final ruling,' Self said. 'The decision of the General Court has been overturned, and the Commission’s original decision has been upheld. In particular, the ECJ held that the Commission was correct to compare the activities of the Irish branches with the head offices of ASI and AOE, and not to take into account the activities of other group companies such as Apple Inc.
Self added: ‘This is an important decision, even though it deals with events from some years ago and the Irish rules on tax residence have now been updated. In particular, the US warned in 2016 that the EU risked damaging international agreements on tax reform if it continued to act as a “supra-national tax authority”. The ECJ’s decision that Europe should collect tax of this magnitude from Apple may push the US towards finally implementing the OECD’s proposed reforms – or could have the opposite effect of causing Pillar One to collapse altogether.'
