CJEU Ruling in Favour of the European Commission
The ruling today by the Court of Justice of the EU (CJEU) in favour of the European Commission and effectively overturning the previous ruling in 2020 that Apple did not have to pay €13.1bn in back taxes to the Irish Exchequer may have been anticipated.
Surprise Element in the Verdict
However, the decision to make it a final binding verdict and not refer the case back to the General Court was a huge surprise as Brendan Murphy, Tax Partner at Baker Tilly explains: “An advocate general of the CJEU had already indicated last November that the previous ruling was legally incorrect and recommended referring the case back to the lower court, so although today’s decision is hardly a surprise, it is surprising that the matter has not been referred back to the General Court to review their findings as was recommended.”
“An advocate general of the CJEU had already indicated last November that the previous ruling was legally incorrect and recommended referring the case back to the lower court, so although today’s decision is hardly a surprise, it is surprising that the matter has not been referred back to the General Court to review their findings as was recommended.”
Reaffirmation of the Commission's Findings
The Commission’s original finding that Ireland had provided Apple with a favourable tax ruling which in effect allowed Apple to shift profits offshore and ultimately fell outside the corporation tax net in any jurisdiction had been successfully appealed to the General Court by Apple.
However, the CJEU decision has ruled back in favour of the Commission and concludes that Apple does indeed owe Ireland corporation tax of €13.1bn for undeclared profits in Ireland between 2003 and 2014.
Irish Government’s Stance and Tax Receipts
The Irish government had been keen to defend their position that they had not provided favourable rulings to Apple. The domestic legislation in the period in question allowed for such a situation to arise whereby an Irish incorporated company could be tax resident in another location and therefore not subject to corporation tax in Ireland. Since 2014 Ireland has continued to implement the OECD BEPs actions which has closed such gaps in domestic legislation.
It is interesting to note that Ireland’s corporation tax receipts for the years in question tended to be in the region of €4bn to €7bn per year whereas 2023 showed record receipts of €23bn with 2024 set to break this record again. Only last week we saw the news that the CT take for August alone was €3.7bn - more than double that of last year. This is a reflection of the importance of the US technology giants like Apple based in the country but also reflects the adherence to changes in international tax law which sees the effective corporation tax rates for these corporates being closer to the headline rate of 12.5% than ever before.
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