The EU’s second-highest court has overturned a ruling that ordered Apple to pay a record €13 billion ($14.9 billion) in back taxes to the Irish government.
The ruling was originally made by the European Commission in 2016 and was seen as a significant win for Margrethe Vestager, the EU’s antitrust chief. Vestager concluded that a “sweetheart deal” from the Irish government meant the iPhone-maker paid an effective tax rate of less than 1 percent, a uniquely preferential deal that counted as “illegal state aid.”
“Member States cannot give tax benefits to selected companies — this is illegal under EU state aid rules,” said Vestager in 2016. “The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.”
Both Apple and the Irish government refuted this, with Apple CEO Tim Cook calling the ruling “total political crap.” Ireland’s government moved to appeal the decision, hoping to also refute allegations that the country was essentially a tax haven for the EU bloc.
Today, though, the 2016 decision was overturned by judges of the General Court of the European Union, who said in a statement that “the Commission did not succeed in showing to the requisite legal standard that there was an advantage” for Apple.
“The General Court considers that the commission did not prove, in its alternative line of reasoning, that the contested tax rulings were the result of discretion exercised by the Irish tax authorities,” said the court.
The Irish Department of Finance welcomed the ruling, saying in a statement: “Ireland has always been clear that there was no special treatment provided to [Apple]. The correct amount of Irish tax was charged, taxation in line with normal Irish taxation rules.”
Apple also welcomed the decision, saying the case “was not about how much tax we pay, but where we are required to pay,” reports Bloomberg.
Margrethe Vestager, now the Executive Vice-President of the European Commission, said the Commission would “carefully study the judgment and reflect on possible next steps.”
“The Commission stands fully behind the objective that all companies should pay their fair share of tax,” said Vestager in a statement. “If Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the EU.”
The Commission now has two months and ten days to appeal the decision with the European Court of Justice, the supreme court of the EU. That decision will be final.
Update, July 15, 06:50AM ET: Story has been updated with comment from Margrethe Vestager.