On Tuesday, the European Court of Justice (ECJ) issued a final ruling in the ongoing case concerning Irish tax rulings for Apple. The court rejected Apple’s appeal against a 13 billion Euros tax order mandated by the European Commission.
Background of the Case
In 2016, the European Commission determined that Apple had benefited from illegal tax advantages in Ireland.
This decision was based on the claim that Apple’s Irish subsidiaries used intellectual property that should have been taxed in Ireland, not just in the US. The Commission estimated that these advantages amounted to 13 billion Euros and ordered Apple to repay this amount to Ireland.
However, in 2020, the General Court annulled the Commission’s decision, ruling that there was insufficient evidence that Apple had received a “selective advantage” from the tax rulings.
Details of the Tax Rulings
The case centers on two tax rulings issued by Ireland in 1991 and 2007, which were favorable to Apple Sales International (ASI) and Apple Operations Europe (AOE).
Although these companies were based in Ireland, they were not tax residents there. The rulings approved their methods for determining taxable profits, excluding profits from intellectual property licenses held outside Ireland.
The European Commission argued that these rulings conferred illegal state aid to Apple by not taxing profits from intellectual property used in products sold globally.
Court’s Judgment
The Court of Justice overturned the General Court’s decision, affirming that the European Commission’s assessment was correct. The ruling highlighted that the General Court had erred in its analysis of Irish tax law and the taxation of intellectual property profits.
The Court confirmed that the tax benefits given to Apple were incompatible with EU rules on state aid. It ruled that profits should have been taxed in Ireland, not just based on the activities of the Apple Group’s head offices in the US.
Apple’s Response
According to a report by the Irish Examiner, an Apple spokesperson commented that the case was not about the amount of tax owed, but about which government should receive it.
They expressed disappointment, noting that the funds for the tax bill have been held in an escrow account, valued at 13.77 billion Euros as of late 2023.
They also stated that the decision ignores international tax laws and emphasized that Apple has always paid taxes where it operates.