UK and International Tax news
Apple State Aid Case Update
Monday 20th July 2020
The General Court of the EU has annulled the decision taken by the European Commission regarding the Irish tax rulings in favour of Apple.
This follows appeals by both Apple and Ireland against the EC’s finding in 2016 that the was selective tax treatment of Apple in Ireland which was illegal under EU state aid rules because it gave Apple a significant advantage over other businesses that were subject to the same national taxation rules.
The EC’s decision required the recovery of illegal state aid for a ten-year period preceding its first request for information in 2013 and instructed the recovery of unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest.
Following the release of the EC’s full decision, the Irish Department of Finance issued a summary of its main lines of argument in Ireland’s annulment application lodged with the General Court of the EU in November 2016. Apple also filed an appeal before the General Court.
The GC has now annulled the contested decision because the EC had not succeeded in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU. It also held that the EC was wrong to declare that the two Apple subsidiaries had been granted a selective economic advantage and, by extension, state aid.
According to the GC, the EC had incorrectly concluded in its primary line of reasoning that the Irish tax authorities had granted the Apple subsidiaries [ASI and AOE] an advantage as a result of not having allocated all of ASI and AOE’s trading income, obtained from the Apple Group’s sales outside North and South America, to their Irish branches. According to the GC, the EC should have shown that that income represented the value of the activities actually carried out by the Irish branches themselves, and not also from the strategic decisions taken and implemented outside of those branches.
In addition, the GC considered that the EC 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 ASI and AOE’s chargeable profits in Ireland.
Whilst the General Court noted the incomplete and occasionally inconsistent nature of the contested tax rulings, the defects identified by the EC were not, in themselves, sufficient to prove the existence of an advantage for the purposes of Article 107(1) TFEU. Furthermore, the GC considered that the EC did not prove, in its alternative line of reasoning, that the contested tax rulings were the result of discretion exercised by the Irish tax authorities and that, accordingly, ASI and AOE had been granted a selective advantage.
An appeal, limited to points of law only, may be brought before the ECJ against the decision of the GC within two months and ten days of notification of the decision.
If you would like further details on this case, please contact Keith Rushen on 0207 486 2378.Contact Us