Apple has been freed from paying €13 billion in Irish back taxes, for now, after the General Court of the European Union annulled the decision made by the European Commission (EC) in 2016.
The Commission four years ago ruled the deal Apple had with Irish tax authorities was illegal, saying Ireland had granted Apple €13 billion in unlawful tax advantages, but the EU’s second highest court this week said there was not enough evidence to show the tech giant broke EU competition rules.
“The General Court annuls the contested decision because the Commission did not succeed in showing to the requisite legal standard that there was an advantage for the purposes of Article 107(1) TFEU,” the judgement [PDF] says.
“According to the General Court, the Commission was wrong to declare that ASI [Apple Sales International] and AOE [Apple Operations Europe] had been granted a selective economic advantage and, by extension, State aid.”
The Commission’s ruling followed a two-year investigation, which found two tax rulings that Ireland issued to Apple “substantially and artificially” lowered the tax the company paid in the country since 1991.
The deal saw Apple attribute all profits from two of its incorporated companies to a “head office” in Ireland, which had no employees and “could not have generated such profits”, the EC said at the time.
“Apple Sales International as a whole paid very little tax on its profits. In 2011, Apple Sales International made a profit of €16 billion; less than €50 million were allocated to the Irish branch. The rest was allocated to the so-called head office where they remained untaxed. This meant that Apple’s effective tax rate in 2011 was 0.05%,” EC commissioner Margrethe Vestager said previously.
“Apple’s tax benefits in Ireland are illegal. Two tax rulings granted by Ireland have artificially reduced Apple’s tax burden for over two decades in breach of EU state aid rules. Apple now has to repay the benefits worth up to €13 billion, plus interest.”
Tim Cook previously called the ruling political crap, saying his company would be fighting the tax penalty “tooth and nail”.
In a statement provided to sister site CNET on Tuesday, Apple thanked the court for its time and said it was “pleased” with the outcome.
“This case was not about how much tax we pay, but where we are required to pay it,” said a company spokesman. “We’re proud to be the largest taxpayer in the world as we know the important role tax payments play in society.”
He added that Apple had paid more than $100 billion in corporate incomes taxes around the world in the last decade, as well as tens of billions in other taxes.
The Commission has 14 days to appeal the decision to the European Court of Justice, with Vestager issuing a statement that said, “We will carefully study the judgment and reflect on possible next steps”.