European Court: Apple does not have to pay 13 billion euros in state aid case

The General Court, part of the Court of Justice of the European Union, has overruled an earlier decision by the European Commission, in which the body ordered Apple to repay 13 billion euros to Ireland for alleged state aid.

The General Court annuls the Commission decision of August 2016, which also automatically removes Apple’s obligation to repay the imposed EUR 13 billion to Ireland. The court concludes that the Commission has not provided any legally convincing evidence that the prohibition of state aid laid down in the Treaty on the Functioning of the EU has been violated. According to the General Court, there was no advantage and the Commission wrongly considered that Apple Sales International and Apple Operations Europe obtained an economic advantage. This means that there is no state aid and the repayment will lapse.

The case revolves around two special tax arrangements that Ireland has with regard to Apple has been issued, which has reduced the American company tax since 1991. The first ruling took place in 1991 and the second in 2007. These related to the taxable profits of two companies, Apple Sales International and Apple Operations Europe. The profit of this was passed on to offices that only existed legally. Under Irish tax laws at the time, this profit was not taxed anywhere, so the effective tax rate in 2003 and 2014 was 1 and 0.005 percent respectively.

In the view of the Commission, Apple paid less tax than other companies and thus had a competitive advantage. It also allowed the company, according to the Commission, to avoid tax on a large part of the profit from the sale of European products, because all sales were made through Ireland. The Commission cites as an example that the Irish division of Apple recorded European profits of a total of 16 billion euros in 2011, but that thanks to the ruling, only 50 million euros were taxed in Ireland.

The matter may not end here. The European Commission can still appeal to the Court of Justice. That appeal must be filed within two months and ten days. The responsible European Commissioner, Margrethe Vestager, says in a statement that the Commission will carefully study the judgment of the General Court and reflect on possible next steps. She has not yet indicated whether the Commission will appeal.

Incidentally, it is not the first time that the Commission has bitten into the dust in such a case about alleged state aid.