Apple tax: iPhone maker and Government suffer major setback in €13bn EU case

Opinion of key adviser to European Court of Justice (ECJ) comes months ahead of final ruling on world’s biggest antitrust case

Apple and the Irish Government have suffered a major setback in a long-running campaign by the European Commission for the iPhone maker to pay the Republic more than €13 billion of alleged back taxes.

A key adviser to the European Court of Justice (ECJ) has recommended that the EU’s highest court set aside a 2020 ruling by a lower court that the commission had failed to prove that the tax was owed at all.

In his opinion, advocate general Giovanni Pitruzzella said the EU general court, the lower court, committed a series of errors of law and also failed to assess “certain methodological errors” relating to Apple’s Irish tax liabilities.

Mr Pitruzzella proposes that the ECJ refer the case back to the general for a new decision on the merits.


The opinion gives an indication of the final outcome of case, as the views of advocate generals in ECJ cases are typically followed by the court when it makes final rulings.

The opinion comes about six months before the ECJ is expected to issue a final ruling on the world’s biggest antitrust case, almost a decade after the commission started investigating how the iPhone maker pays tax in the Republic, home to its main subsidiaries outside the US.

“It seems that this case is going to rumble on for a few years more. It is quite possible that whichever side loses the second hearing at the general court will appeal the case back to the ECJ, so it could be several years before we have a final decision,” said Peter Vale, a tax partner at Grant Thornton Ireland.

“While Ireland’s tax regime is generally viewed as very transparent and endorsed by the OECD (Organisation for Economic Co-operation and Development), today’s development puts it back in the spotlight.”

EU competition commissioner Margrethe Vestager ordered Apple in 2016 to pay the State more than €13 billion in alleged back taxes, covering 2004 to 2014, as she claimed the Republic had given the US tech giant illegal tax aid.

The decision centred on two tax opinions – or “rulings” as they are referred to – handed out by Revenue, in 1991 and 2007, to Apple subsidiaries in Ireland, the year the first iPhone was unveiled and Apple’s profits started to balloon.

The main thrust of the commission’s case was that the rulings gave the US technology giant an unfair and select advantage over other corporate taxpayers, as it allowed the group to channel most European sales through employee-less “head office” parts of two Cork-based based subsidiaries, Apple Sales International (ASI) and Apple Operations Europe (AOE), which were non-resident for tax purposes.

Only the activities of Irish “branches” within the same units were subject to tax in the State.

The commission claimed that valuable intellectual property (IP) behind Apple products lay inside the Irish branches of ASI and AOE, meaning that most of the profits were taxable by Revenue in Dublin. Apple, on the other hand, argued it was held outside the branches – and ultimately controlled from group headquarters, in Cupertino, California.

A legal appeal by Ireland and Apple against the commission’s decision resulted in a ruling by the EU general court in 2020 that Ms Vestager’s officials failed to prove the tax was owed at all. The commission fell short of demonstrating to “the requisite legal standard” that Apple had received illegal state aid through a “sweetheart” tax deal that gave it an unfair advantage over other companies, the court rules.

The commission’s appeal against that ruling, heard in at the ECJ in May, was premised on claims that the lower EU court made “legal errors” in its judgment three years ago by confusing aspects of Apple’s corporate structure.

However, senior counsel for Apple, Daniel Beard, told the court that Apple has been paying €20 billion in tax to the US on the same profits in the decade to 2014 that the commission argues was owed to the Irish exchequer.

The advocate general concluded that the general court had “erred in law” by misinterpreting how the commission had arrived that the view that the IP had to be located in the Irish branches.

Minister for Finance Michael McGrath said that his officials and the State’s legal team will consider the opinion in detail.

“It has always been, and remains, Ireland’s position that that the correct amount of Irish tax was paid and that Ireland provided no State aid to Apple,” he said. “We now await the judgment of the Court of Justice of the European Union on this matter.”

A spokeswoman for Apple said: “The General Court’s ruling was very clear that Apple received no selective advantage and no state aid, and we believe that should be upheld.”

In 2018, the Government collected and put into escrow the alleged €14.3 billion of back taxes and interest the commission claimed it was owed from Apple.

The size of that pot, which is mainly made up of investments in European government bonds rather than cash, subsequently fell to €13.4 billion by the end of last year. This was down to the effects of pervasive negative rates on European bonds in recent years and Apple being allowed to take out some money to pay taxes in other jurisdictions.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times