Tax Rulings: No State aid for Apple after all?

Apparently, Apple Group is still getting off scot-free – at least for now – as far as the repayment of alleged State aid regarding Irish tax rulings is concerned. The General Court of the European Union (EGC), the competent court of first instance, annulled the Commission’s decision demanding the recovery of State aid in its ruling of 15 July 2020. The action for annulment had been brought before the EGC by the Republic of Ireland and Apple subsidiaries (cases T-778/16 and T-892/16).

The Commission had concluded that tax rulings issued by Ireland in favour of Apple constituted unlawful State aid because of allegedly artificially reduced tax amounts and ordered Ireland to recover a record sum of approx. EUR 13bn. The EGC has now ruled that the Commission did not succeed in proving that the tax rulings constituted an unlawful tax advantage by granting the Apple subsidiaries a selective economic advantage pursuant to Article 107  (1) of the Treaty on the Functioning of the European Union (TFEU). The judgment of the EGC has not yet become final. The Commission has decided to appeal to the Court of Justice of the European Union (CJEU) as the final instance.

Commission sees illegal tax benefits 

In August 2016, the Commission concluded (case no. SA.38373) that Ireland had granted illegal tax benefits to the Apple Group. The Irish Revenue had issued two tax rulings in favour of two companies of the Apple Group (Apple Sales International – ASI and Apple Operations Europe – AEO). A tax ruling is an agreement between a tax authority and a company on the manner in which taxes are paid. The Irish tax rulings of 1991 and 2007 endorsed the way in which ASI and AOE established their taxable profits in Ireland, which were attributed to the trading activity, in particular to distribution and logistics, of their respective Irish subsidiaries.

From the point of view of the Commission, the Irish Revenue endorsed artificial methods of calculating profits which do not reflect economic reality. The tax rulings therefore constituted a selective economic advantage granted to ASI and AEO. The Commission thus ordered Ireland to recover illegal tax benefits of approx. EUR 13bn to restore equal treatment with other undertakings in a similar situation.

EGC annuls recovery decision of the Commission

The EGC did not follow this line of argument. According to the Court, the Commission did not succeed in proving that the profits in question were generated in Ireland and should thus have been taxed in Ireland. Value had been created in Ireland. The intellectual property was developed in the US while the Irish subsidiaries only performed logistics and distribution. According to the Court most of Apple’s profit was generated and taxed in the US.

Related cases

The Commission has enforced State aid law several times in the past against what it considered unlawful tax practices of Member States in order to prevent a competition of low taxation in the EU. With regard to the tax rulings in favour of Starbucks in the Netherlands, the EGC also denied that they violated State aid law (judgment of 24 September 2019, T-760/15, T-636/16). This judgement has become final. However, the EGC confirmed that Luxemburg has to recover selective tax advantages from FIAT (judgment of 24 September 2019, T-755/15 and T-759/15). This case is still pending before the CJEU (case C-885/19 P). Further actions for annulment of a Commission decision ordering recovery of EUR 250m from Amazon and Luxemburg are pending before the EGC (cases T-318/18, T-816/17).


It remains to be seen whether the CJEU will ultimately uphold the Commission decisions on national tax practices.

The State aid control of the Commission is not limited to tax rulings. In its “Notice on the notion of State aid”, the Commission dedicates a comprehensive chapter to “Specific issues concerning tax measures” which  – in addition to tax rulings – deals specifically with depreciation/amortisation rules, fixed basis tax regimes for specific activities, anti-abuse rules, excise duties, cooperative societies, undertakings for collective investment, tax amnesties and tax settlements.

In the light of all of the foregoing, undertakings and public authorities should be aware of the potential risks of State aid and take precautions to minimize them.

(EGC, judgment of 15 July 2020, Ireland et al. v. European Commission, cases T-778/16 and T-892/16, ECLI:EU:T:2020:338)

Dr. Gerd Schwendinger
Renata Rehle

October 2020