BRUSSELS, July 15 (Xinhua) — The General Court of the European Union (EU) on Wednesday rescinded an EU order, which had required U.S. technology giant Apple to pay Ireland 13 billion euros (14.9 billion U.S. dollars) in tax arrears.
The decision effectively canceled an Aug. 2016 European Commission decision. The EU court ruled that the Commission had wrongly declared that Apple Sales International (ASI) and Apple Operations Europe (AOE), which were companies incorporated in Ireland but not tax resident there, had been granted a “selective economic advantage” and, by extension, state aid.
The EU General Court’s clear-cut decision could now face another appeal at the highest European Court of Justice (ECJ) level.
In her initial reaction, European Commission Executive Vice President Margrethe Vestager said on Wednesday that the EU executive was studying the judgment and would reflect on the next steps.
In 2016, the EU had accused Ireland of allowing Apple to park revenue earned in Europe, Africa, the Middle East and India and sparing it almost all the taxation due. According to the European Commission, this gave Apple an advantage over other companies, allowing it to avoid Irish taxes between 2003 and 2014. This, it said, constituted illegal “state aid” given by Ireland.
The EU decision was based on two tax rulings, which endorsed the methods used by the ASI and the AOE to determine their chargeable profits in Ireland relating to the trading activities of their respective Irish branches. The January 1991 tax ruling remained in force until 2007, when it was replaced by the 2007 tax ruling. This in turn remained in force until Apple’s new business structure was implemented in Ireland in 2014.
But Apple fought back and succeeded in its EU court case, in which the ruling said that the Commission “did not succeed in showing the requisite legal standard that there was an advantage.”
The EU General Court noted that the Commission had incorrectly concluded, in its primary line of reasoning, that the Irish tax authorities had granted the ASI and the AOE an advantage as a result of not having allocated the Apple Group intellectual property licenses and taxing its trading income.
According to the court, the Commission should have shown that that income represented the value of the activities actually carried out by the Irish branches themselves, in view of the activities and functions actually performed by the Irish branches of the ASI and the AOE on the one hand, and the strategic decisions taken and implemented outside of those branches on the other.
Furthermore, the EU General Court ruled that the Commission did not prove that the contested tax rulings were the result of discretion exercised by the Irish tax authorities and that Apple had been granted a selective advantage over its competitors.
Vestager said: “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.
“The Commission will continue to look at aggressive tax planning measures under EU state aid rules to assess whether they result in illegal state aid,” she added. Enditem