On 10 September 2024, the EU Court of Justice issued its judgment related to tax rulings issued by Ireland to Apple pursuant to which profits were excluded from the taxable income of Apple’s Irish subsidiaries, thereby avoiding taxation amounting to approximately EUR 13 billion. The Court reversed the earlier judgment of the General Court and ruled that the EU Commission was justified in qualifying the rulings as (illegal) State aid.
The Court confirms its earlier judgments (in particular in the Engie and Amazon cases) pursuant to which Member States are free to define taxable income as they see fit in their national law. The EU Commission cannot contest such national rules as “State aid” by claiming that they derogate from OECD rules or the arm’s length principle (except where a Member State has incorporated the arm’s length principle in its national tax law). Accordingly, tax rulings may be qualified as “State aid” only if such rulings misapply the applicable national rules. This is a matter for the EU Commission to demonstrate. The Commission’s position may be challenged before the EU Courts by both the Member State and the addressee of the ruling. Both the General Court and (on appeal) the Court of Justice will verify whether the Commission was justified in finding that a ruling misapplies national law. Thus, for the purposes of the State aid rules, the final word on the interpretation of national tax law rests with the EU courts.
With respect to the rulings issued by the Irish tax administration to Apple, the General Court had ruled in an earlier judgment that the Commission failed to demonstrate that such rulings misapply Irish tax law. The Court of Justice now reverses that judgment and finds that the Commission was justified in qualifying the rulings – in so far as these rulings excluded the profits at issue from Irish taxable income – as misapplying Irish tax law. The judgment of the Court of Justice, which is not subject to further appeal, means that Apple is subject to Irish taxation on the previously excluded profits.
