After a lengthy and high-profile appeal process that began when the European Commission ruled in 2016 that Ireland granted Apple undue tax benefits of up to €13 billion which contravened EU State Aid rules, the case has now reached its conclusion. 

The investigation leading to the ruling was originally initiated by the European Commission in 2013.  

In its ruling on 10 September 2024, the European Court of Justice (ECJ) has set aside a previous judgment of the lower General Court in 2020 that ruled in favour of Ireland and Apple to overturn the 2016 European Commission ruling, stating "The Court of Justice gives final judgment in the matter and confirms the European Commission’s 2016 decision: Ireland granted Apple unlawful aid which Ireland is required to recover." 

This ruling marks a very significant win for the European Commission in an otherwise mixed history of success in taking State Aid cases to tackle perceived underpayment of taxes by multinationals.  

While the ruling is not helpful for Ireland’s reputation, it should be viewed from a 2024 lens in its historical context. Ireland acted in 2013 to reform its corporate tax residence rules to prevent Irish incorporated companies from being stateless for tax purposes, which in part facilitated the structure used by Apple in the periods covered by the ruling. Ireland also introduced other significant changes concerning corporate taxation and transparency measures in line with the EU and OECD’s BEPs initiatives to put its regime on a best-in-class footing by international standards concerning corporate taxation, which alongside other initiatives and external factors have been a positive driver in a very significant increase in Ireland’s foreign direct investment in the intervening years.  

In addition to rejecting the basis for ruling, Apple previously stated that the same profits assessed by the European Commission to have benefited from illegal State Aid have been subject to tax in the US. The ruling again underlines the contentious nature of the agreement of taxing rights over the profits of multinational companies.   

A summary of the original ruling

• In 1991 and 2007, Ireland issued two tax rulings in relation to two companies in the Apple Group, both incorporated under Irish law but not tax resident in Ireland. These companies were only taxable under Irish rules on profits earned by their Irish Branch operations. These rulings were assessed by the European Commission as giving rise to a preferential tax treatment under EU State Aid rules.
• In 2016, the EC found that the tax rulings, by excluding from the tax base the profits deriving from the use of intellectual property (IP) licenses held by the companies, granted those companies between 1991 and 2014, State Aid that was unlawful and incompatible with the internal market. The State Aid was quantified as €13 billion.
• The Irish Government vigorously rejected the basis for the 2016 ruling, stating Ireland had always been clear that there was no special treatment provided to the two Apple companies, and the correct amount of Irish tax was charged in line with normal Irish taxation rules that applied in the periods covered by the ruling.
• The Irish tax authorities (the Revenue Commissioners), which acts independent of Government, also stated emphatically that there was (i) no departure from the applicable Irish tax law by Revenue, (ii) there was no preference in applying that law, (iii) the full tax due by Apple in accordance with the law was paid. The Revenue Commissioners further stated the profits of non-Irish resident companies that are not generated by their Branches (such as profits from technology, design and marketing that are generated outside of Ireland) cannot be charged with Irish tax under Irish law.
• In 2020, in an appeal brought before it by Ireland and Apple, the General Court annulled the 2016 State Aid ruling by the Commission, ruling that the Commission had been unable to show that there was a selective advantage that arose from the adoption of the tax rulings at issue and resulted in a preferential reduction of the tax base in Ireland.
• In November 2023, the Advocate General, acting as an advisor to the ECJ, recommended that the decision of the General Court be annulled and referred back to the General Court for a new decision. 
• Although not a binding opinion, the ECJ tends to follow the advice of its Advocate General recommendations. In this context, the ruling of 10 September 2024 by the ECJ to set aside the judgment of the lower General Court, which previously overturned the Commission’s decision, was very unexpected.

What next?  

The ECJ’s judgement is the final determination in this long running case. The State Aid funds, which have been held in an Escrow Fund since 2018, pending the outcome of the ECJ court procedures, will now accrue to the Irish State.  

On 10 September, Ireland's Department of Finance commented that as of 9 September, the value of the Escrow Fund is in the order of €14.1 billion, being invested in short-dated, highly rated, liquid fixed income instruments which will be realised over the coming months. It has stated the Fund will be released from Escrow following the issue of tax assessments by the Revenue Commissioners, with tax payments paid to the Revenue Commissioners, and in turn to the Exchequer. The full balance in the Fund, after fees and operational expenses are paid, will accrue to the State. It is expected that this process may take at least 6 months.

In its original decision, the European Commission noted that there was a possibility that other countries, i.e. “third countries”, may seek to tax some of the profits which the Commission were proposing to allocate to the Irish branches of the Apple companies, such that the amount of State Aid would be reduced from the headline figure they had proposed. Two third country adjustments have been made to date. A total of €455 million has been paid out in third country adjustments since 2019. €209 million was returned to Apple during 2019, while a further third country adjustment took place in May 2021 for €246 million. The Department of Finance has stated it is not currently aware of any further third country claims.