The European Court of Justice annulled an EU decision involving Apple subsidiaries in Ireland. Four years ago, the European Commission accused Ireland of not collecting EUR 13 billion of Apple’s taxes.
According to the press statement, the EU Commission failed to demonstrate to the necessary legal standard that there was an advantage for the purposes of Article 107 of the Treaty.
As early as 2017, the Commission had claimed that Apple had received unlawful State aid and had to pay more taxes. The European Court of First Instance had stated that this argument did not have a legal basis.
According to the Court of First Instance, the EU Commission was wrong to declare that Apple Sales International and Apple Operations Europe had obtained a selective economic advantage and, by extension, State aid
Today’s decision is a blow to the European Commission’s strategy to strike at multinationals that have optimised their tax structure in order to reduce the effective tax rate across Europe, a strategy that was mostly embodied by the then Commissioner for Competition Margrethe
Between 2003 and 2014, Apple operated with two major subsidiaries in Europe: Apple Sales International and Apple Operations Europe. At the time, the Commission claimed that these subsidiaries attributed most of their profits to a location that only exists on paper. • This selective treatment allowed Apple to pay an effective corporate tax rate of •1% on its European profits in 2003, falling to 0.005 percent in 2014 • said Vestager in 2016.
Apple’s arguments have always been quite simple. According to the company, Ireland has never made an agreement with Apple. In 2016, CEO Tim Cook stated that the opinion issued on 30 August claimed that Ireland gave Apple a special agreement on our taxes. This statement has no basis of fact or law. We have never asked for, or received, special offers.
Although Apple has always claimed to comply with tax laws in Europe, it is also doubtful whether it has taken advantage of favorable tax laws in Ireland and the so-called Double Irish tax structure.
The EU Commissioner’s reply to the Apple judgment, Margrethe Vestager, did not wait: We will carefully study the sentence and reflect on the possible next steps.
The Commission decision concerned two tax rulings issued by Ireland to Apple, which resulted in the taxable profit of two Irish Apple subsidiaries in Ireland between 1991 and 2015. Following the judgments, for example, in 2011, Apple’s Irish subsidiary recorded European profits of EUR 16 billion, but only about EUR 50 million were considered taxable in Ireland under tax ruling.
The Commission is actively committed to making all businesses pay the right share of taxes. If Member States grant certain multinational companies tax advantages that are not available to their competitors, this will harm fair competition in the EU. It also deprives public funds and citizens of the necessary investment funds, which are even more acute during the crisis periods.
In previous judgments on Fiat’s tax treatment in Luxembourg and Starbucks in the Netherlands, the Court confirmed that, although Member States have exclusive competence in determining their laws on direct taxation, they must do so in compliance with EU law, including the rules on aid.
The Court also confirmed the Commission’s approach to assessing whether a measure is selective in nature, and whether transactions between group companies give rise to an unfair advantage under EU State aid rules.
The Commission will continue to examine aggressive tax planning measures under EU State aid rules to assess whether they involve unlawful State aid. At the same time, the application of State aid must go hand in hand with a change in business philosophies and the right legislation to address gaps and ensure transparency. We have already made a lot of progress at national, European and global level, and we must continue working together to succeed.