Apple and the Irish government managed to overturn the European Commission’s controversial 2016 decisions (Ireland (Case T-778/16) and Apple (Case T-892/16)) to recoup EUR 13 billion in taxes, plus more than EUR 1.2 billion of interest. On 15 July 2020, the General Court of the European Union (“EGC”) annulled the disputed European Commission’s decision, stating that “the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU.”
In 2016, the Commission adopted a decision on two tax rulings issued by the Irish tax authorities dated 29 January 1991 and 23 May 2007 in favour of two Apple companies incorporated but not tax resident in Ireland. The Commission considered that the tax rulings in question constitute state aid, incompatible with the internal market, and demanded the recovery of the aid in question. The disputed tax rulings – that were related to the trading activity of Apple’s Irish branches – endorsed the methods used by Apple to determine its chargeable profits in Ireland.
The EGC’s decision
In its decision of 15 July 2020, the EGC annuls the disputed decision because the Commission did not succeed in proving that Apple’s Irish entities were granted an economic advantage through state aid as set out in Article 107(1) TFEU.
The EGC ruled that the Commission incorrectly concluded that the Irish tax authorities had granted Apple a selective economic advantage, and, by extension, state aid. According to the EGC, the Commission did not prove that that income represented the value of the activities actually carried out by the Irish branches themselves.
Moreover, the EGC did not demonstrate methodological failures in the contested tax rulings which would have led to a reduction in Apple’s chargeable profits in Ireland.
In addition, the EGC considers that the Commission did not prove that the tax rulings in question were the result of discretion exercised by the Irish tax authorities and that, accordingly, Apple had been granted a selective advantage.
The Commission can appeal the EGC’s decision on points of law only, and not on the facts and circumstances and the burden of proof. It now has two months to appeal the decision with the European Court of Justice, the supreme court of the EU, and that decision will be final. The Commission may appeal, because the Apple case is considered a landmark case. However, in similar landmark cases – such as the Starbucks case (T‑760/15) – the Commission decided not to make use of its right to appeal.
Many companies operating internationally restructured their “double Irish schemes” as a result of the Apple case, the amended US Tax law, and the new EU and OECD anti-tax avoidance rules. As a result, the risk of a state aid procedure for the old double Irish schemes has decreased significantly.