Staff Writer AccountingWEB
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Apple wins $13bn EU state aid tax appeal

In the European Commission tax case against Apple, the European General Court (EGC) ruled that the tech giant does not owe Ireland €13bn (£11.6bn) in illegal state aid.

22nd Jul 2020
Staff Writer AccountingWEB
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Glass entrance to the Apple Store at Nanjing road opened on the September 23, 2011. Many people inside and outside the shop.

The European appeal court overturned a 2016 ruling that found tech giant Apple had benefited from illegal state aid tax breaks by Ireland.

The decision requiring Apple to reimburse €13bn (and €1.2bn in interest) was overturned due to a lack of evidence, and denied the European Commission (EC) stance that Apple had been given tax advantages that equated to state aid.

According to the court, the commission failed to provide proof “to the requisite standard” of the preferential treatment given to Apple amounted to illegal state aid and “did not prove [that] the contested tax rules were the result of discretion exercised by the Irish tax authorities.”

The EGC also claimed the EC was wrong to claim Apple benefited from an illegal arrangement from the Irish government that gave the company “a selective economic advantage”, a key critierion of the tax tready defining state aid.

Between 2010 and 2020, Apple paid over $100bn (£79bn) in global corporate income taxes alone, whilst enjoying Irish corporation tax rates of under 1%, and as low as 0.05% in 2014. With some of the lowest corporate tax rates in the EU, Ireland is Apple's administrative base for Europe, Africa and part of Asia.

“This case was not about how much tax we pay, but where we are required to pay it,” the tech giant commented. “We’re proud to be the largest taxpayer in the world, as we know the important role tax payments play in society.”

The European Commission has 14 days to appeal against the EGC’s ruling at the European Court of Justice – the supreme court of the European Union. The €14.3bn collected in 2018 by the Irish government will remain in escrow until the final verdict. The case could take another three years until a final verdict is given.

While regularly called a ‘tax haven’ by critics, the Irish government welcomed the EGC’s ruling. “Ireland has always been clear that there was no special treatment provided,” it said. 

“Ireland appealed the commission decision on the basis that Ireland granted no state aid and the decision today from the court supports that view. The correct amount of Irish tax was charged [in] line with normal Irish taxation rules.”

The EC ruling is yet another setback for European competition commissioner Margrethe Vestager, who has been campaigning hard to crack down on tax during her time in office. Vestager said she will “study the judgment and reflect on possible next steps”.

The EU has plans to announce legislation next year for a digital services tax, in order to target global tech giants for large tax sums. The UK has already enacted its own digital services tax that took effect from 1 April 2020. Any businesses earning more than £500m in worldwide revenues from social media, search engines or online marketplaces now has to pay 2% of UK revenues of more than £25m from these services to the Exchequer.

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