Apple State Aid Case

On September 10, 2024, the Court of Justice of the European Union (the ECJ) delivered a pivotal ruling in favor of the European Commission (the Commission) in the long-standing dispute over Apple’s tax arrangements with Ireland. The case dates back to 2016 when the Commission ordered Apple to recover of more than EUR 13 billion in back taxes to Ireland, alleging that the country’s tax deals amounted to illegal state aid under EU law. Although the General Court overturned the Commission’s decision in 2020, in this final verdict, the ECJ sides with the Commission.

In our view, the ECJ’s ruling provides the following takeaways:

• Functional Substance:
  • The ECJ does not exclude the possibility of companies’ board members performing valuable functions and managing significant risk, but if such active or critical functions are not properly evidenced in governance documentation, they are effectively allocated to another (part of the) entity.
• Roles & Responsibilities:
  • When employees of board members wear different hats (i.e., if they are active in subsidiaries as well as the (foreign) parent company), their roles and responsibilities for these different entities need to be properly distinguish and documented.
• OECD Guidance:
  • The ECJ did rely on the OECD’s Authorized Approach, although the Irish tax code did not provide for a direct implementation of that guidance.

The full text of the decision can be found in the following link!

Questions?

If you have any questions regarding this subject, please don’t hesitate to contact our colleagues Taco Wiertsema or Brian Schalker.