Apple's $14.9 billion tax bill overturned by EU court

iPhone event
iPhone event (Image credit: Apple)

What you need to know

  • The General Court of the European Union has delivered its judgment in the case of Apple and Ireland.
  • The court has annulled the previous ruling.
  • The court said the Commission did not prove that the arrangement was a selective economic advantage.

The General Court of the European Union has overturned a ruling stating that Apple should pay nearly $15 billion in tax to the Irish Government.

Both Apple and Ireland appealed a ruling stating that Apple owed the country nearly $15 billion in tax payments and that arrangements between the two countries were unfair, and amounted to state aid.

In a ruling issued this morning the court stated:

"By today's judgment, the General Court annuls the contested decision because 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.According to the General Court, the Commission was wrong to declare that ASI and AOE (Apple Sales International and Apple Operations Europe) had been granted a selective economic advantage, and by extension, state aid.

The ruling further stated:

The General Court considers that the Commission incorrectly concluded, in its primary line of reasoning, that the Irish tax authorities had granted ASI and AOE an advantage as a result of not having allocated the Apple Group intellectual property licenses held by ASI and AOE and, consequently, all of ASI and AOE's trading income, obtained from the Apple Group's sales outside North and South America to their Irish branches. According to the General Court, the Commission should have shown that that income represented the value of the activities actually carried out by the Irish branches themselves...

The court also ruled that the Commission "did not succeed" in demonstrating methodological errors in the contested tax rulings which would have led to a reduction in ASI and AOE's chargeable profits in Ireland.

Whilst the court noted that the contested tax rulings were by nature "incomplete and occasionally inconsistent", the defects themselves were not sufficient in proving that Apple received an advantage akin to state aid. The court also stated that the Commission did not prove that the contested rulings were the result of discretion exercised by the Irish tax authorities and that, accordingly, ASI and AOE had been granted an advantage.

The case is likely to be appealed by the EU, limited to points of law, and brought before the European Court of Justice within two months and ten days of today. An appeal of the ruling is likely to extend the dispute by another 2-3 years. An appeal by the EU would need to demonstrate that the GCEU has incorrectly interpreted and applied the law to the facts of the case.

The Irish Government's department of finance said it "welcomes the judgment" in a statement to iMore:

We welcome the judgment by the General Court of the European Union annulling the Decision of the European Commission of August 2016, which alleged Ireland provided State aid to Apple.Ireland has always been clear that there was no special treatment provided to the two Apple companies - ASI and AOE. The correct amount of Irish tax was charged taxation in line with normal Irish taxation rules.Ireland appealed the Commission Decision on the basis that Ireland granted no state aid and the decision today from the Court supports that view.

In a statement, the European Commission's Executive VP Margrethe Vestager stated:

"Today's judgment by the General Court annuls the Commission's August 2016 decision that Ireland granted illegal State aid to Apple through selective tax breaks. We will carefully study the judgment and reflect on possible next steps. The Commission's decision concerned two tax rulings issued by Ireland to Apple, which determined the taxable profit of two Irish Apple subsidiaries in Ireland between 1991 and 2015. As a result of the rulings, 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. The Commission stands fully behind the objective that all companies should pay their fair share of tax. If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the EU. It also deprives the public purse and citizens of funds for much needed investments – the need for which is even more acute during times of crisis.

Stephen Warwick
News Editor

Stephen Warwick has written about Apple for five years at iMore and previously elsewhere. He covers all of iMore's latest breaking news regarding all of Apple's products and services, both hardware and software. Stephen has interviewed industry experts in a range of fields including finance, litigation, security, and more. He also specializes in curating and reviewing audio hardware and has experience beyond journalism in sound engineering, production, and design. Before becoming a writer Stephen studied Ancient History at University and also worked at Apple for more than two years. Stephen is also a host on the iMore show, a weekly podcast recorded live that discusses the latest in breaking Apple news, as well as featuring fun trivia about all things Apple. Follow him on Twitter @stephenwarwick9