On September 10, 2024 on the website of the Court of Justice of the European Union (CJEU) the judgment of the CJEU in Case C-465/20 P, Commission v Ireland and Others, ECLI:EU:C:2024:724, was published.
Today the CJEU gave final judgment in the matter, sets aside the judgment of the General Court and gives final judgment in the matter and confirms the European Commission’s 2016 decision that Ireland granted Apple unlawful aid which Ireland is required to recover. By doing so, the CJEU ruled in line with the opinion of Advocate General Pitruzella as delivered on November 9, 2023.
As a result of todays judgment Apple will have to pay an additional €13 billion of Irish taxes.
In 1991 and 2007, Ireland issued two tax rulings in favour of two companies in the Apple Group (Apple Sales International (ASI) and Apple Operations Europe (AOE)). Both companies were incorporated in Ireland but not tax resident in Ireland. Those tax rulings approved the methods used by ASI and AOE to determine their chargeable profits in Ireland in relation to the trading activity of their respective Irish branches.
In 2016, the European Commission found that, by excluding from the tax base the profits generated by the use of intellectual property licences held by ASI and AOE, on the ground, essentially, that the head offices of those companies were located outside Ireland and management of those licences depended on decisions taken at the level of the Apple Group in the United States, the tax rulings had, from 1991 to 2014, conferred on those companies State aid that was unlawful and incompatible with the internal market, and from which the Apple Group as a whole had benefited. The Commission therefore ordered Ireland to recover the aid. According to Commission estimates, Ireland had given illegal tax benefits worth €13 billion to Apple.
In 2020, in actions brought before it by Ireland and by ASI and AOE, the General Court annulled the Commission’s decision, ruling that the Commission had been unable to show that there was a selective advantage that arose from the adoption of the tax rulings at issue and resulted in a preferential reduction of the tax base in Ireland.
By todays judgment, on appeal by the Commission, the CJEU set aside the judgment of the General Court and gave final judgment in the matter.
According to the CJEU, the General Court erred when it ruled that the European Commission had not proved sufficiently that the intellectual property licences held by ASI and AOE and related profits, generated by sales of Apple products outside the United States, should have been allocated, for tax purposes, to the Irish branches. In particular, the General Court erred when it ruled that the Commission’s primary line of reasoning was based on erroneous assessments of normal taxation under the Irish tax law applicable in the case, and when it upheld the complaints raised by Ireland and by ASI and AOE regarding the Commission’s factual assessments of the activities of the Irish branches of ASI and AOE and of activities outside those branches.
After setting aside the judgment under appeal, the CJEU considered that the state of the proceedings is such that it may give final judgment in the actions, and that it should do so within the limits of the matter before it. In that context, the CJEU confirms in particular the Commission’s approach according to which, under the relevant provision of Irish law relating to the calculation of tax payable by non-resident companies, the activities of the branches of ASI and AOE in Ireland had to be compared not to activities of other Apple Group companies, for example a parent company in the United States, but to those of other entities of those companies, particularly their head offices outside Ireland.
The full text of the judgment of the CJEU of September 10, 2024 in the Apple state aid case can be found here.
Reaction of the Irish Government to the CJEU Judgment
The Government of Ireland has today (Tuesday) noted the statements in relation to the judgment from the Court of Justice of the European Union (CJEU) that did not find in favour of Ireland’s arguments in the Apple State aid case. We will consider the judgment carefully when it is circulated.
The Irish position has always been that Ireland does not give preferential tax treatment to any companies or taxpayers. The CJEU has found that the tax paid was insufficient and that a greater amount of taxation was required to be recovered. Ireland will of course respect the findings of the Court regarding the tax due in this case.
Today’s judgment provides the final determination in this case and the process of transferring the assets in the Escrow Fund to Ireland will now commence in the manner prescribed in the Deed governing the operations of the Escrow Fund.
The Apple case involved an issue that is now of historical relevance only; the Revenue opinions date back to 1991 and 2007 and are no longer in force; and Ireland has already introduced changes to the law regarding corporate residence rules and the attribution of profits to branches of non-resident companies operating in the State.
Ireland is an active participant in international tax discussions and has also made necessary changes to its taxation regime as international tax rules have developed over time.
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