Apple wins case against EU €13bn tax ruling

In August 2016, the European Commission decided Apple owed €13 billion in back taxes

Ireland and Apple have won their appeal against the European Commission over a €13 billion tax bill.

The judgment was made by the EU General Court after the Government and Apple appealed a decision made in 2016 by the Commission.

In its ruling the General Court said it “annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage” for Apple and that the Commission was wrong to declare that the particular Apple entities based in Cork and at the heart of the case “had been granted a selective economic advantage and, by extension, State aid”.

An appeal is expected to be made to the Court of Justice, the highest court of the EU, the ruling of which will be final.

In a statement, the Department of Finance welcomed the judgment, saying Ireland had always been clear that it gave "no special treatment" to Apple.

"The correct amount of Irish tax was charged taxation in line with normal Irish taxation rules," the Department said.

In August 2016, the European Commission decided Apple owed €13 billion in back taxes, plus interest.

The Commission argued that Apple received favourable tax rates from the Irish State by channeling the majority of their European profits through their non-resident branches in Cork – known as ASI and AOE – helping the company avoid domestic tax rates.

It said two Revenue tax opinions – in 1991 and in 2007, the year Apple unveiled the iPhone – gave the US technology giant an unfair advantage over other corporate taxpayers.

Interest brought the bill to about €14.3 billion. That money – the largest sum ever enforced by the Commission – was collected by the Government in 2018 and put into an escrow account while the case is resolved.

The Commission's view was based on the idea that the valuable intellectual property behind Apple products lay outside the Irish branches and was controlled in group headquarters in California.

On Wednesday, the General Court said it endorses the Commission’s assessments relating to normal taxation under Irish law, but ruled the Commission incorrectly concluded that “the Irish tax authorities had granted ASI and AOE an advantage as a result of not having allocated the Apple Group intellectual property licences held by ASI and AOE”.

It ruled that the Commission “should have shown that the income represented the value of the activities actually carried out by the Irish branches themselves”. It also said the Commission did not succeed in demonstrating “methodological errors in the contested tax rulings which would have led to a reduction in ASI and AOE’s chargeable profits in Ireland”, nor that the rulings “were the result of discretion exercised by the Irish tax authorities”.

EU competition chief Margrethe Vestager, for whom the Apple case was a cornerstone of an enforcement campaign towards big tech companies, said her team would carefully study the judgment and consider what next steps to take.

"The Commission stands fully behind the objective that all companies should pay their fair share of tax. If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the EU. It also deprives the public purse and citizens of funds for much needed investments – the need for which is even more acute during times of crisis," Ms Vestager said in a statement.

It is the second time that Brussels has failed to demonstrate that a multinational company benefited from state aid, after another multi million-euro case against Starbucks was overturned last year. As with the Starbucks case, legal experts warned the EU would struggle to win an appeal on the points of law, since the commission largely lost the case on not being able to meet the burden of proof.