#Apple
The Court of Justice of the European Union has annulled the 2016 decision of the European Commission which ordered Apple to return €13 billion ($14.5bn) to the Irish government.
The Commission found a selective tax advantage given to Apple by the Irish government to be an illegal state aid.
Ireland and Apple challenged the Commission’s decision, which Apple’s Chief Executive described at the time as “total political crap”, the Obama administration also issued an angry response describing the Commission’s decision as an: unforeseeable departure from the status quo; retroactively applied; and, inconsistent with international tax norms.
In their judgement the General Court argues that the Commission did not succeed in showing to the ‘requisite legal standard’ for an advantage. However, in a statement on the judgement Executive Vice-President Margrethe Vestager pointed out: “In 2011, for example, Apple's Irish subsidiary recorded European profits of US$ 22 billion (c.a. €16 billion) but under the terms of the tax ruling only around €50 million were considered taxable in Ireland.” This would mean that Apple had paid the equivalent of 0.3% in corporate tax, when Ireland’s corporate tax rate at that time was 12.5%.
The General Court considers that the Commission incorrectly concluded that the income represented the value of the activities actually carried out by the Irish branches themselves. Apple argued in its appeal that extensive expert evidence showing that the profits were not attributable to activities in Ireland. However, in her original statement in 2016 Vestager acknowledged this pointing out that Apple’s Irish "head office" had no employees, no premises and no real activities. Only the Irish branch of Apple Sales International had any resources and facilities to sell Apple products, but under the tax rulings it was the "head office" that was attributed almost all of the company's profits.
Both the European Commission and the General Court appear to acknowledge that the profits attributed to the Ireland “head office” were a work of fiction.
Vestager points out that In previous judgments on the tax treatment of Fiat in Luxembourg and Starbucks in the Netherlands, the General Court confirmed that, while Member States have exclusive competence in determining their laws concerning direct taxation, they must do so in respect of EU law, including State aid rules.
While the European Commission has not yet decided on a course of action it is likely that it will appeal the General Court’s judgement.