September 21, 2020

Revocation by the General Court of the European Union of the Commission's decision on Irish tax rulings granted in favour of Apple – 15 Jyly 2020

On 30 August 2016, the European Commission adopted Decision (EU) 2017/1283 considering that the tax rulings granted by the Irish tax authorities constituted illegal State aid put in place by Ireland in favour of Apple Sales International (ASI) and Apple Operations Europe (AOE) for an amount of €13 billion and requiring their recovery.

Ireland, ASI and AOE have brought an action for annulment of this decision.

On 15 July, the General Court revoked this decision on the grounds that "the Commission has not succeeded in demonstrating to the requisite legal standard the existence of an advantage within the meaning of Article 107(1) TFEU" prohibiting State aid.

The General Court has thereby revoked one of the Commission's landmark decisions in its fight against tax advantages and digital giants, considering that the Commission's submission relating to normal taxation under Irish tax law did not show convincingly that there was a financial advantage in favour of Apple. According to the General Court, the Commission “erroneously concluded, by way of its principal reasoning, that the Irish authorities conferred an advantage on ASI and AOE for not having allocated to their Irish branches the licences for the intellectual property of the Apple group held by ASI and AOE and, consequently, all of ASI's and AOE's commercial income obtained from the sales of the Apple group outside the American continent”. It adds that “it should have shown that those revenues represented the value of the activities actually carried out by the Irish branches themselves, in particular with regard, first, to the activities and functions actually carried out by the Irish branches of ASI and AOE and, second, to the strategic decisions taken and implemented outside those branches”.

The General Court, while recognizing that the contested tax rulings are sometimes incomplete and inconsistent, also considers that the deficiencies identified by the Commission are not sufficient enough to prove the existence of unlawful State aid on the basis of Article 107(1) TFEU.

Lastly, “the Court considers that the Commission has not proved, by way of its alternative reasoning, that the contested tax rulings were the consequence of the discretionary power exercised by the Irish tax authorities and that, as a result, a selective advantage would have been granted to ASI and AOE” and therefore concludes the invalidation of the Commission’s decision.

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