Apple Suffers Setback as EU Court Orders Review of Tax Order Case

An EU tribunal made legal errors when it ruled in favour of Apple over a EUR 13 billion (nearly Rs. 1,16,000 crore) tax order and should review the case again, an adviser to Europe's top court said on Thursday, in a potential setback for the iPhone maker. 

The tax case against Apple was part of EU antitrust chief Margrethe Vestager's crackdown against deals between multinationals and EU countries that regulators saw as unfair state aid.

The European Commission in its 2016 decision said Apple benefited from two Irish tax rulings for more than two decades that artificially reduced its tax burden to as low as 0.005 percent in 2014.

The European Union's General Court in 2020 upheld Apple's challenge, saying that regulators had not met the legal standard to show Apple had enjoyed an unfair advantage.

But advocate General Giovanni Pitruzzella at the EU Court of Justice (CJEU) disagreed, saying CJEU judges should set aside the General Court ruling and refer the case back to the lower tribunal.

"The judgment of the General Court on 'tax rulings' adopted by Ireland in relation to Apple should be set aside," he said in a non-binding opinion.

He said the General Court committed a series of errors in law and had also failed "to assess correctly the substance and consequences of certain methodological errors that, according to the Commission decision, vitiated the tax rulings".

"It is therefore necessary for the General Court to carry out a new assessment," Pitruzzella said.

The CJEU, which will rule in the coming months, follows around four in five such recommendations.

Ireland reiterated that it had not provided any state aid to Apple.

"It is important to bear in mind that this opinion does not form part of the Court of Justice of the European Union judgment but is considered by the Court when arriving at its final ruling," Michael McGrath said in a statement.

"It has always been, and remains, Ireland's position that the correct amount of Irish tax was paid and that Ireland provided no state aid to Apple."

While Apple and Dublin appealed against the tax order, Apple nevertheless had to hand over the full amount, which Ireland has been holding in an escrow account.

The Irish government has long said that even if it loses the its appeal and gets to keep the money, other EU member states will make claims that they are owed some of the back taxes.

"We thank the court for its time and ongoing consideration in this case. 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," an Apple spokesperson said.

Vestager has had a mixed record defending her tax cases in court, with judges backing challenges by automaker Stellantis, Amazon and Starbucks.

Her biggest legal victory to date came in September when the General Court upheld her decision against a EUR 700 million (nearly Rs. 6,250 crore) Belgian tax scheme for 55 multinationals. Her tax crackdown has forced EU countries to scrap such sweetheart deals.

Vestager is currently investigating IKEA brand owner Inter IKEA's Dutch tax arrangement in a case dating from 2017, Nike's Dutch tax rulings and Finnish food and drink packaging company Huhtamaki's tax rulings granted by Luxembourg.

© Thomson Reuters 2023