Ireland: Tax rulings found not selective tax advantages; arm’s length principle

Ireland: Tax rulings found not selective tax advantages

The General Court of the European Union today issued a judgment annulling the decision of the European Commission regarding Irish tax rulings that were issued in favor of a multinational corporate entity.


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The General Court found the EC did not “succeed in showing to the requisite legal standard” that there was an advantage for purposes of measures under the EU treaty. The General Court thus concluded that Ireland did not grant illegal state aid to the companies.

The case relates to tax rulings granted by the Irish Revenue in 1991 and 2007 confirming the basis for the attribution of taxable profits to Irish branch operations of the multinational group companies.

The case is: Ireland v. Commission (Case T-778/16, 15 July 2020) and Apple Sales International and Apple Operations Europe v. Commission (Case T-892/16, 15 July 2020)

Read the judgment of the General Court.

As explained by a related release [PDF 319 KB] from the General Court:

  • The EC in 2016 adopted a decision  concerning two tax rulings issued in 1991 and then in 2007 by Irish Revenue in favor of the companies that were incorporated in Ireland but not tax resident in Ireland.
  • The contested tax rulings endorsed the methods used by the companies to determine their chargeable profits in Ireland, relating to the trading activity of their respective Irish branches.
  • The 1991 tax ruling remained in force until 2007, when it was replaced by the 2007 tax ruling. The 2007 tax ruling then remained in force until the companies’ new business structure was implemented in Ireland in 2014.
  • The EC found the tax rulings in question constituted state aid, unlawfully put into effect by Ireland. The aid was declared incompatible with the internal market. The EC demanded the recovery of the aid in question (determined to be €13 billion).
  • The companies contested the EC decision, and today, the General Court annulled the EC’s decision.

The General Court today held that the EC did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of provisions of the EU Treaty and that the EC was wrong to declare that the companies had been granted a selective economic advantage and, by extension, state aid.

The General Court also endorsed the EC’s assessments relating to normal taxation under the Irish tax law applicable in the present instance, in particular having regard to the tools developed within the OECD such as the arm’s length principle, in order to check whether the level of chargeable profits endorsed by the Irish tax authorities corresponded to that which would have been obtained under market conditions. However, the General Court concluded the EC incorrectly concluded, in its primary line of reasoning, that the Irish tax authorities had granted the companies an advantage as a result of not having allocated the multinational group’s intellectual property licenses.

Read a July 2020 report prepared by the KPMG member firm in Ireland

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