Short Reads

European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion from Apple

European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion from Apple

European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion from Apple

03.10.2016 NL law

On 30 August 2016, the European Commission concluded that two tax rulings issued by Ireland in 1991 and 2007 to Apple constituted State aid. According to the Commission, these tax rulings have substantially and artificially lowered the tax paid by Apple in Ireland since 1991.

The legal presence of Apple in Europe consists of two Irish incorporated companies, namely Apple Sales International and Apple Operations Europe. The first company is responsible for buying Apple products from equipment manufacturers around the world and selling these products in Europe. The second company focuses on manufacturing certain lines of computers for the Apple group. 

After an in-depth investigation which started in June 2014, the Commission concluded that the two tax rulings gave Apple Sales International and Apple Operations Europe a selective advantage. This means that other undertakings, which were in the same factual and legal circumstances, did not enjoy the same benefits as these companies. The Commission considered that Apple Sales International and Apple Operations Europe were allowed, due to these rulings, to allocate their profits to their "head office". The head office was not subject to tax in any country under specific provisions of the Irish tax law and existed 'only on paper' as it did not have any employees or own premises. The Commission stressed that tax rulings as such are perfectly legal. However, it was of the opinion that the tax rulings issued by Ireland endorsed an 'artificial internal allocation of profits' within Apple Sales International and Apple Operations Europe. In particular, it held that this allocation had 'no factual or economic justification' as only the Irish branch of Apple Sales International and Apple Operations Europe had the capacity to generate income. Therefore, the Commission concluded that the sales profits of these companies should have been taxed in Ireland. The rulings endorsed a way to establish the taxable profits which did not correspond to economic reality according to the Commission.

The Commission ordered Ireland to recover the illegal State aid received by Apple as a result of the two tax rulings between 2003 and 2013. The Commission can only order the recovery of illegal State aid granted ten years before its first request for information on the matter. In this case this first request was made in 2013.

 

This article was published in the Competition Law Newsletter of October 2016. Other articles in this newsletter:

  1. Court of Justice ends Pilkington's fight against fine in the car glass cartel
  2. General Court upholds Commission's decision that reverse payment settlements constitute a 'by object' infringement
  3. European Commission puts price signalling on the agenda
  4. European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion from Apple
  5. Commission publishes Preliminary Report on the e-commerce sector inquiry
  6. Brussels Court of Appeal confirms interim measures against exclusive TV broadcasting rights

Team

Related news

06.05.2021 EU law
Abuse of economic dependence: lessons drawn from the first judgments

Short Reads - On 22 August 2020, the ban on abuse of economic dependence was implemented in Belgium (Article IV.2/1 of the Code of Economic Law). Now that almost a year has passed and the first judgments have been rendered, we assess what first lessons can be drawn from these judgments. The rulings show that the ban is regularly relied upon in court and has lowered the hurdle for plaintiffs to make their case.

Read more

01.04.2021 NL law
Slovak Telekom: ECJ on essentials of the ‘essential facilities’ doctrine

Short Reads - Only dominant companies with a “genuinely tight grip” on the market can be forced to grant rivals access to their infrastructure. According to the ECJ’s rulings in Slovak Telekom and Deutsche Telekom, it is only in this scenario that the question of indispensability of the access for rivals comes into play. In the assessment of practices other than access refusal, indispensability may be indicative of a potential abuse of a dominant position, but is not a required condition.

Read more

01.04.2021 NL law
Pay-for-delay saga ends with nothing new; but pharma quest continues

Short Reads - On 25 March 2021, the ECJ ended the Lundbeck pay-for-delay saga by dismissing the appeals from Lundbeck and five generic manufacturers against a European Commission ‘pay-for-delay’ decision. Following its recent Paroxetine judgment, the ECJ found that Lundbeck’s process patents did not preclude generic companies being viewed as potential competitors, particularly since the patents did not represent an insurmountable barrier to entry. In addition, the patent settlement agreements constituted infringements "by object".

Read more

01.04.2021 NL law
ECJ in Pometon: beware of too much info in staggered hybrid proceedings

Short Reads - In hybrid cartel proceedings (in which one party opts out of settlement), settlement decisions should not pre-judge the outcome of the Commission's investigation into non-settling parties. When the Commission publishes the settlement decision before the decision imposing a fine on the non-settling party, it must be careful in its drafting, the European Court of Justice confirmed. Furthermore, differences in the fining methodology applied to (similarly placed) settling and non-settling parties will have to be objectively justified and sufficiently reasoned.

Read more