| Picture: “the fifth avenue apple store” by Synthesis Studios is licensed under CC BY-SA 2.0.
In a major legal development, the Court of Justice of the European Union (CJEU) has overturned a previous ruling by the General Court regarding tax benefits granted by Ireland to tech giant Apple. The court confirmed that Ireland had unlawfully granted State aid to Apple, a decision originally made by the European Commission in 2016.
BACKGROUND
The European Commission’s 2016 ruling found that from 1991 to 2014, Apple received undue tax advantages from Ireland, which the Commission classified as illegal State aid. These benefits stemmed from Ireland’s tax treatment of profits generated by Apple’s operations outside the United States, particularly through two subsidiaries, Apple Sales International (ASI) and Apple Operations Europe (AOE).
Both companies, though incorporated in Ireland, were not tax residents. The Commission argued that Ireland’s tax rulings allowed these companies to reduce their taxable profits within the country, based on intellectual property licenses held outside Ireland but attributed to their Irish branches. The Commission estimated the value of these unlawful tax benefits at €13 billion and ordered Ireland to recover the amount from Apple.
GENERAL COURT’S REVERSAL IN 2020
In 2020, the General Court annulled the Commission’s decision, ruling that the evidence did not sufficiently prove Apple had received a selective advantage. The General Court argued that the Commission had failed to establish that Apple’s Irish branches benefited from reduced tax bases as a result of Ireland’s tax rulings.
| Picture: “Court of Justice of the European Union” by Valeria Fernandez Astaburuaga is licensed under CC BY-SA 2.0.
COURT OF JUSTICE OVERTURNS DECISION
Upon appeal by the European Commission, the Court of Justice has now set aside the General Court’s 2020 ruling. The CJEU found that the General Court erred in its assessment of the Commission’s findings. According to the CJEU, the Commission had correctly demonstrated that the profits from intellectual property licenses held by ASI and AOE should have been allocated to their Irish branches for tax purposes. The ruling confirms that the tax advantages Apple received were unlawful under European Union State aid rules.
The Court of Justice further stated that the activities of Apple’s Irish branches should not have been compared to those of its U.S.-based parent companies, but rather to the companies’ head offices located outside Ireland.
The Court of Justice’s decision now reinstates the European Commission’s 2016 ruling, requiring Ireland to recover the €13 billion in illegal State aid granted to Apple. This ruling marks the final legal word in a long-running dispute over Apple’s tax arrangements in Europe.
Stay tuned for further updates on this landmark case.
SOURCES/RECOMMENDED READ:
- CURIA – List of Results (C-465/20 P)
Official documents and rulings from the Court of Justice of the EU related to this case.
