Background to the dispute
The Apple Group’s global business is structured around key functional areas. Apple Operations Europe (AOE) and the subsidiary Apple Sales International (ASI) have set up Irish branches.
The Irish tax authorities adopted advance tax decisions, known as ‘tax rulings’, in relation to certain taxpayers who had made requests to that effect. By letters of 29 January 1991 and 23 May 2007 (collectively, ‘the contested tax rulings’), the Irish tax authorities indicated their agreement with the proposals made by the Apple Group’s representatives concerning the chargeable profits of ASI and AOE in Ireland.
Resolution of the EU Commission
In 2014 the Commission opened a formal investigation procedure, laid down in TFEU (‘the Opening Decision’) concerning the contested tax rulings issued by the Irish tax authorities regarding the chargeable profits allocated to the Irish branches of ASI and AOE, on the ground that those rulings could constitute State aid. Such kind of aid, granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is incompatible with the internal market according to TFEU.1 The Commission followed a three-step analysis in order to prove the existence of a selective advantage in the present instance. Overall it concluded that the contested tax rulings gave rise to a reduction in the charges that ASI and AOE would normally have been required to bear in the course of their business operations and that, accordingly, those rulings had to be regarded as having granted those two companies operating aid. The Commission noted that those aid measures were incompatible with the internal market and that they constituted unlawful State aid, which would be a significant breach of the EU legislation. It stated that Ireland was required to recover the aid granted by the contested tax rulings for the period running from 12 June 2003 to 27 September 2014.
Annulment of the Resolution of the Commission
Ireland, ASI and AOE sought annulment of the contested resolution in as much as it stated that the contested tax rulings constituted State aid and ordered the recovery of sums which would have been collected from those companies by Ireland as corporate taxes.
The General Court annulled the Commission’s resolution. It concluded the Commission did not prove, in the present instance, that, by issuing the contested tax rulings, the Irish tax authorities had granted ASI and AOE a selective advantage.
Ireland, Apple and the Commission have two months to decide if they want to appeal the decision and address it before the Court of the European Union.