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The European Union's General Court has today issued its decision in the State aid case concerning Apple in Ireland, finding that Ireland did not grant illegal State aid to Apple. The case relates to opinions issued by the Irish Revenue in 1991 and 2007 which confirmed the basis for the attribution of taxable profits to Irish branch operations of Apple Group companies.

Speaking following the ruling, Tom Woods, Head of Tax at KPMG said; “In our view, the EU General Court was correct in its decision. The decision is an endorsement of the Irish tax regime and its administration over a long number of years. The European Commission now has 2 months and 10 days to appeal the decision. The initial indication is that it is a clear ruling in the taxpayer’s favour. It is worth noting that the outcome should not, in any event, have widespread implications for Ireland’s corporation tax or transfer pricing regime.”

The deciding factors

The General Court found that the Commission “did not succeed in showing to the requisite legal standard” that there was any illegal State aid.

On the European Commission’s primary line of argument (that all of the income of the companies in question was attributable to Ireland), the Commission failed to demonstrate that the income related to activities carried out by the Irish branches.

On the European Commission’s secondary line of argument (relating to methodological errors in allocating profits to Ireland), the Commission could not prove that any defects identified by the Commission resulted in illegal State aid.

On the European Commission’s alternative line of argument (that the rulings were the result of discretion exercised by the Irish Revenue), the Commission again failed to evidence this.

Irish corporation tax system

This case is highly dependent on the unusual and exceptional fact pattern and therefore, whilst the decision is welcome, the outcome did not have widespread implications for Ireland’s corporation tax or transfer pricing regime.

The European Commission has explicitly confirmed in writing previously that the case does not call into question the fundamentals of Ireland’s tax regime, which include:

  • an attractive 12.5% rate of corporation tax,
  • a generous research and development tax credit regime,
  • an attractive intellectual property taxation regime including an EU and OECD compliant Knowledge Development Box regime offering a 6.25% rate of corporation tax for profits from qualifying activities, and
  • a continuing commitment to remain an attractive location for FDI whilst adhering to the highest international taxation and transparency standards.

Click here to read the Irish Department of Finance’s initial response to the decision.

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