EU court confirms Ireland must recover €13bn from Apple

On 10 September 2024 the Court of Justice of the European Union (CJEU) gave its final judgment in Commission v Ireland and Others (C-465/20 P): Ireland granted Apple unlawful state aid and is required to recover it. The Court set aside the 2020 judgment of the General Court, which had sided with Apple, and decided the case itself, thereby confirming the decision the European Commission took in 2016. By the Commission’s estimates, the unlawful tax benefits were worth about €13 billion.

What the Court decided

In 1991 and 2007 Ireland issued two tax rulings in favour of two Apple group companies, Apple Sales International and Apple Operations Europe. Both were incorporated in Ireland but not tax resident there, and the rulings approved how to calculate the taxable profits of their Irish branches. In 2016 the Commission concluded that, by excluding from the tax base the profits from intellectual property licences, on the grounds that the head offices were outside Ireland and that management of the licences depended on decisions taken in the United States, the rulings had given the two companies, from 1991 to 2014, a tax advantage that was unlawful and incompatible with the internal market.

The General Court annulled that decision in 2020, finding that the Commission had not proved a selective advantage. The Court of Justice now holds that the General Court erred in ruling that the Commission had not shown that those licences and their profits, generated by sales of Apple products outside the United States, should have been attributed to the Irish branches for tax purposes. It also confirms the Commission’s approach: the activities of the branches had to be compared with those of their head offices outside Ireland, and not with those of other group companies, such as the US parent.

The money and the reactions

In 2018 Apple paid about €14.3 billion into an escrow fund jointly overseen by the Irish state and the company: the aid as calculated by the Irish tax authority, €13.1 billion, plus €1.2 billion in interest. The money was waiting for the final judgment, and the Commission had ordered recovery of the aid for the ten-year period from 2003 to 2014.

After the ruling, the Irish government said it would respect the Court’s findings and that the process of transferring the escrow funds to Ireland would begin. It also maintained that Ireland has never given any company preferential tax treatment, that the tax opinions concerned are no longer in force, and that it has since changed its rules on corporate tax residence and the attribution of profits to branches. Apple said it was disappointed and that there had never been a special deal.

The same day: Google Shopping

On 10 September the Court of Justice also decided the appeal by Google and Alphabet against the fine the Commission imposed on them in 2017 for abusing a dominant position in online search. The Commission had fined the company €2,424 million for giving preference, in 13 countries of the European Economic Area, to its own comparison shopping service over those of its competitors. The Court dismissed the appeal and upheld the General Court’s 2021 judgment and, with it, the fine. Google said it was disappointed with the ruling.

For a company with subsidiaries in several countries, the case is a reminder that an agreement with a tax authority is not a definitive guarantee if the Commission considers it to be state aid: recovery can be demanded many years later, as here, and with interest. It is worth keeping documentation on how prices between group companies are set and on which tax rulings or agreements have been obtained, and following state-aid cases on tax closely. Ask your tax adviser how this applies to you.

In state aid, time does not always work in the beneficiary’s favour.