EU Commission is subject to Apple's tax dispute

The Court of Justice of the European Union does not classify Apple’s tax benefits as illegal aid. The additional tax claim of EUR 13 billion plus interest is therefore invalid. The EU Commission still has a way to go to the European Court of Justice.

In the first instance, the EU Commission has the legal dispute over the tax benefits of the Irish government for Apple lost. The iPhone manufacturer’s tax refund of EUR 13.1 billion requested by Brussels is invalid. According to the court, the EU Commission has not demonstrated that the tax benefits granted to Apple constitute an illegal subsidy.

Ireland attracts multinationals with lower taxes (Image: xtock / Shutterstock).Ireland had already agreed a tax agreement with Apple in 1991. It regulated how the profits of Apple’s European branches in Ireland – Apple’s Sales International (ASI) and Apple Operations Europe (AOE) – should be taxed. The agreement was renewed in 2007. It was again valid until 2014.

Finally, four years ago, the EU Commission classified both regulations as illegal state aid. They confirmed Apple’s tax practice, according to which the Cupertino-based company had a “Head Office“In Ireland, but had no employees and was not taxed.

Ireland was then instructed to collect the resulting tax liability from Apple. It was only in September 2018 that the country reported receipt of the additional tax payment including interest on arrears of 1.2 billion euros. Ireland and Apple also sued the EU Commission.

“The court annuls the contested decision because the Commission has not been able to provide sufficient legal evidence that there is an advantage within the meaning of Article 107 (1) TFEU,” the ruling states. “In the Court’s view, the Commission wrongly stated that ASI and AOE had received a selective economic advantage and thus State aid.”

Apple had accused the EU of, among other things, the additional demand contradicting reality. The EU’s decision also retrospectively changes laws, which creates legal uncertainty. Apple also argued that its products were developed in the United States, which is why profits are taxable there.

In a first statement, Apple was pleased with the judgment of the Court of Justice of the European Union. “In this case, it was not about how much tax we pay, but where we have to pay it,” said a company spokesman. “We are proud to be the largest taxpayer in the world because we know the important role tax payments play in society.”

The EU Commission can appeal the judgment. The case would then concern the European Court of Justice. EU Commissioner Margrethe Vestager announced that she would examine the judgment closely and then consider the next steps for the Commission.

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