Apple had not received illegal state aid from Ireland, according to the EU General Court
The General Court of the European Union (General Court) annulled an earlier decision by the European Commission (Commission), which had held that two Irish transfer pricing rulings issued to companies within the Apple corporate group (the Companies) constituted illegal state aid. As a result of the General Court's decision, Ireland is no longer required to recover approximately €13 billion of state aid (plus interest) from the Companies, which the Commission had previously estimated was the amount of undue tax benefits that Ireland had conferred pursuant to the rulings.
The Commission has just under two months to appeal the decision.
KPMG Ireland has commented that the outcome of this case was highly dependent on the unusual facts involved and does not have widespread implications for Ireland's corporate tax or transfer pricing regime.
The General Court's decision turned on whether the Commission had properly concluded that the Irish tax rulings granted a selective advantage for the Companies. Notably, in its decision, which was released on July 15, 2020, the General Court endorsed the Commission's use of Ireland's ordinary rules of corporate taxation (particularly having regard to the OECD arms' length principle, among other tools developed by the OECD), as a reference framework to assess the tax rulings.
The General Court found that the Commission did not "succeed in showing to the requisite legal standard" that Ireland granted the Companies a selective advantage by issuing the tax rulings in question (which endorsed the Companies' methods to attribute chargeable profits in Ireland, relating to the trading activity of the Irish branches). The General Court concluded that the Commission wrongly decided that Ireland had granted illegal state aid to the Companies, and therefore the Commission's decision had to be annulled.
According to the General Court, the Commission had failed to demonstrate that all of the income of the Companies was attributable to Ireland and could not prove that the methodological errors it identified in allocating profits to Ireland resulted in illegal state aid. Finally, the General Court held that the Commission had failed to establish its alternative line of argument that the rulings were issued by the Irish tax authorities on a discretionary basis.
In its 2016 decision, the Commission found that the rulings in question constituted illegal state aid, and therefore Ireland had to recover the undue Irish tax benefits from the multinational group for the years 2003 to 2014 of up to €13 billion, plus interest. Both Ireland and the Companies appealed the Commission's decision to the General Court.
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