On 15 July 2020, the General Court of the European Union decided in its judgment in Ireland v. Commission (T-778/16 and T-892/16) that the tax advantages enjoyed by Apple do not constitute State aid. In doing so the General Court annulled the European Commission decision of 29 August 2016, stating that “the Commission did not succeed in showing to the requisite legal standard that there was a selective advantage for the purposes of Article 107(1) TFEU”.
At the core of this dispute lies the question of whether the tax rulings issued by Ireland in favour of Apple can be considered as State aid within the meaning of Article 107(1) TFEU. In its decision, the Commission concluded that this was the case and ordered Ireland to recoup the aid.
Both Ireland and Apple lodged an appeal against the Commission’s decision.
The political and financial stakes of this case were very high. For the Commission, this case was an important test to see if State aid rules can be used as a means to combat corporate tax avoidance or optimisation. For Apple, the case was about the possible recovery of 13 billion euros.
In its judgement, the General Court followed the Commission’s assessments on the legal level. Particularly, the Court considered that the Commission did not err when it identified as the reference framework the ordinary rules of taxation of corporate profit and when it relied on the arm’s length principle.
The Court nonetheless set aside the Commission’s factual assessments concerning the question of whether there was a selective advantage for the purposes of Article 107(1) TFEU. According to the Court, the Commission’s reasoning was based on erroneous assessments of normal taxation under Irish tax law. In that regard, the Court stated that “the Commission did not succeed in showing that, by issuing the contested tax rulings, the Irish tax authorities granted Apple an advantage for the purposes of Article 107(1) TFEU”. In addition, the Court underlined that “the defects in the methods for calculating the chargeable profits of [Apple] demonstrate the incomplete and occasionally inconsistent nature of the contested tax rulings. However, in themselves, those circumstances are not sufficient to prove the existence of an advantage for the purposes of Article 107(1) TFEU”. Consequently, the Court annulled the Commission’s recoup order against Apple.
Please contact Pierre de Bandt or Jeroen Dewispelaere for further information on these cases and/or for general advice relating to State aid.