Apple and the Irish Government have been successful in overturning a European Commission decision that two tax rulings granted to the company by the Irish Government were unlawful.

Following an in-depth state aid investigation launched in June 2014, the European Commission concluded that the tax rulings (issued in 1991 and in 2007) “substantially and artificially lowered the tax paid by Apple in Ireland since 1991.” Apple was required to pay back taxes into an escrow account set up by the Irish Government, along with interest, pending the outcome of the Government and Apple’s appeal.

The European Commission had argued that Ireland’s endorsement of Apple’s Irish tax arrangements had enabled Apple to pay less tax than competing companies would be able to pay – that it had granted it a “selective tax advantage”, and that the tax rulings issued by Ireland endorsed an artificial internal allocation of profits that had “no factual or economic justification”.

It therefore decided that the two tax rulings had granted Apple a selective tax advantage that amounted to illegal state aid.

However, the EU’s General Court on July 15 decided that the Commission had not succeeded in showing to the requisite legal standard that there was an advantage. It consequently decided to annul the contested decision.

The EC is expected to appeal the General Court’s decision before the European Court of Justice, though, so the fat lady may yet be just warming up her vocal cords in the wings…

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

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