Explainer: What today's court decision means for Apple and Ireland's €13bn tax case
The case is also likely to reignite the debate over Ireland's tax treatment of multinationals.
The European Court of Justice has ruled against tech giant Apple in its latest legal bid against a €13bn tax order the European Commission said it must pay to Ireland.
Finance Minister Jack Chambers will update Cabinet on Ireland’s next steps following the ruling.
The EU Commission has been successful in setting aside a 2020 ruling which overturned its original decision that Apple had underpaid taxes to the value of €13.1bn which was due to the Irish authorities between 2003 and 2014.
In November, the Advocate General of the European Court of Justice came out in favour of the EU Commission's tax order to Apple, adding that judges should back the ruling issued by EU competition regulators to the tech giant in 2016.
In its decision from eight years ago, the European Commission said the €13.1bn related to Irish back taxes which the iPhone maker should pay along with €1.3bn in interest. A lower tribunal had upheld Apple's challenge.
The Advocate General's opinion is massively influential and provides a clear indication of how Europe's highest court, however his opinion ended up being only partially upheld.
It had been expected, at worst, that the case would have been sent back to the General Court for a second hearing.
Many had even expected that the ECJ would have gone against the Advocate General's opinion, bringing closure to the case in favour of Apple and Ireland.
However, while the ECJ agreed that the 2020 ruling should be overturned, it did not refer it back to the General Court and instead issued its own binding verdict, which cannot be appealed.
"This is the end now, it is payday for Ireland," says Stephen Daly, Reader in Tax Law at King's College London.
Speaking to the Mr Daly also notes that while the ECJ case focuses only on Apple, the iPhone maker's tax structure is not all that different to those adopted by other multinationals in Ireland.
"We had many Irish incorporated companies that were not resident in Ireland but held intellectual property," Mr Daly explains.
"That meant they could tell the tax authority that its intellectual property was held offshore. However, now the ECJ has said 'No, it was not held offshore, it is still controlled by Ireland, therefore, Ireland is the place where the majority of the profits attributable to the IP should be taxed."
"This calls into question almost all tax arrangements that used this regime," Mr Daly notes.
This means the European Commission can look back over a decade to multinationals in Ireland and start asking questions.
"They can go to Revenue and ask to see which multinationals were using the double Irish structure. This verdict leaves a lot of open questions."
The verdict is also likely to reignite the debate over Ireland's tax treatment of multinationals, with Donald Trump just last week reiterating calls for US multinationals who have moved to Ireland in search of lower taxes to return home.
This follows long-standing accusations from US politicians that Ireland is a tax haven, accusations which ultimately led the European Commission to investigate Apple's tax affairs in Ireland in 2014.
Ireland has long been labelled a haven due to its attractively low corporation tax rate, company incentives and special-purpose vehicles to help multinationals reduce the amount they owe.
In 2016, the European Commission found that Apple received illegal state aid from Ireland over a more than ten-year period between 2003 and 2014, with it being declared that the iPhone maker owed the Irish exchequer more than €13bn in unpaid taxes.
The findings of the investigation focused on two tax rulings from Revenue in 1991 and 2007 - the year the first iPhone was launched.
The investigation also found that Ireland's tax rules gave Apple an “unfair and select advantage” over other companies in Ireland, allowing the US tech giant to funnel almost all of its European sales through several tax-exempt subsidiaries in its Irish operations.
The commission also declared that Apple held valuable intellectual property (IP) beyond the reach of Ireland's Revenue Commissioners, with it also finding that these subsidiaries should not have been tax-exempt.
However, both Apple and successive Irish governments have continually argued that the tax was not due, with both parties appealing the decisions to the EU General Court, which overturned the Commission’s finding in a July 2020 ruling.
The EU’s General Court ruled that the European Commission “did not succeed in showing to the requisite legal standard” and that Apple had received tax advantages from Ireland, ruling in favour of the tech giant.
The decision was subsequently appealed to the European Court of Justice by the Commission, which is the highest court in Europe, with the first hearing taking place in May this year.
During the latest appeal case, Apple representatives confirmed that it paid almost €580m in corporate tax to the Irish exchequer between 2003 and 2014, which it claims represented 12.5% of the profits the company generated here.
The tech giant has said the debate over its taxes was never about how much they owe, but where they owe it.
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