Ireland: The Apple Case: An Irish Perspective

Last Updated: 14 October 2016
Article by Jonathan Sheehan

Most Popular Article in Ireland, October 2016

The European Commission's decision that Ireland granted undue tax benefits of up to EUR13 billion (US$14.5 billion), plus interest, to Apple has sent shockwaves across the Atlantic and dealt a significant blow to EU/US economic relations. Ireland is caught in the middle of the cross-fire.


The decision is the conclusion of a two-year investigation by the EU Commission into the corporate tax affairs of Apple in Ireland. An EU competition law case, the decision centres on two tax rulings issued by Ireland to Apple in 1991 and 2007, which the Commission has concluded amount to illegal State Aid. The effect is that Ireland is now required by the Commission to recover unpaid taxes from Apple going back 10 years of up to EUR13 billion, plus interest. Both Apple and Ireland intend to appeal.

Under the Treaty on the Functioning of the European Union, "any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings ... shall, in so far as it affects trade between Member States, be incompatible with the internal market". The Commission has concluded that the tax rulings granted by Ireland to two Apple companies conferred a selective advantage over other businesses that are subject to the same national taxation rules. In other words, in the Commission's opinion Ireland granted Apple a 'sweetheart' deal on its Irish tax affairs.

The advance opinions issued by Ireland (Ireland does not technically issue binding tax rulings) related to the manner in which profits were internally allocated within the two Apple companies to their Irish branches. According to the Commission, the rulings endorse a profit allocation that was not in line with the "arm's length principle" and the worldwide sales profits of both companies should have been taxed in Ireland.


While Ireland taxes Irish resident companies on their worldwide profits, non-Irish resident companies are only subject to corporation tax on the income attributable to their activities in Ireland. Ireland's approach in agreeing the tax rulings was to tax Apple under the applicable Irish rules which required that the two Apple companies be taxed in Ireland on the basis of the income generated by their Irish branches only. As the remainder of the income of those companies was not generated by their Irish branches, it was not subject to tax in Ireland.

Transfer pricing rules and the "arm's length principle" as set out in the OECD's Transfer Pricing Guidelines were introduced in Ireland in 2010, almost two decades after the 1991 ruling, and three years after the 2007 ruling. Ireland also unilaterally amended its corporate tax residence rules in October 2013 to address a mismatch between the tax rules in Ireland and other jurisdictions (principally the US) which had resulted in so-called "stateless" companies. However, the Commission's decision is effectively forcing Ireland to levy back taxes on the basis of current rules which were not in force in Ireland at the time that the arrangements in question were in place. The retroactive nature of the decision will be a key ground of any appeal.


While less emotive than retroactivity, much of the legal argument of any appeal is likely to focus on the more nuanced interpretation of what constitutes State Aid and whether the Commission has departed from prior EU case law and Commission decisions. A key criterion of State Aid is that the advantage conferred by a Member State is selective, i.e. it favours certain undertakings or the production of certain goods. According to the Commission, the profit allocation method endorsed in the tax rulings amounted to selective tax treatment "because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules." In its press release the Commission identifies this selective advantage as being a profit allocation that does not reflect economic reality and is not in line with the "arm's length principle". (At the time of writing the full text of the Commission decision is not publicly available and it could be several months before a redacted version is released.)

However, the approach of the Commission is regarded by some as novel and out of step with State Aid jurisprudence. In a White Paper released in advance of the Commission's decision, the US Treasury asserted that the Commission has collapsed the distinct requirements of "advantage" and "selectivity" into a single requirement of whether the measures confer a "selective advantage" without separately examining the selective character of the advantage. As a result, the Commission's new approach is to reduce a State Aid inquiry into whether it believes that a transfer pricing ruling satisfies "its view of the arm's length principle". This, the US Treasury claims, is a departure from the 65 previous State Aid cases involing tax rulings cited by Commissioner Vestager as having been concluded since 1991 and appears to expand the role of the Commission's Directorate-General (DG) for Competition into that of a "supra-national" tax authority that reviews Member State's transfer pricing determinations.


Direct taxation remains within the competence of EU Member States. Member States retain sovereignty over their direct tax affairs as regards the manner and extent to which companies are taxed, subject to compliance with the EU's fundamental freedoms and State Aid law. However, in seeking to re-write Ireland's tax rules and override its transfer pricing rulings, it is contended that the Commission is encroaching into the sovereign Member State competence of taxation.

Support for encroachment by the Commission beyond competition law is also implicit in the Commission's announcement of its decision where it effectively invites other countries to claim some of the unpaid taxes for themselves. The apparent contradiction in the Commission requiring Ireland to tax the total sales profits of the two Apple companies, while acknowledging that the sums may in fact be taxable in other jurisdictions (including the US), is not lost on Ireland. The concept that Ireland would not be judged to have granted illegal State Aid if another jurisdiction had exercised taxing rights over the same profits is, according to the Irish Government, "difficult to understand".


Unfortunately, few will see beyond the damaging headlines to Ireland's reputation. However, the case is one of a series of State Aid investigations by the Commission since 2014 into perceived aggressive tax practices by a number of (mostly US headquartered) multinationals. In October 2015 the Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, respectively. Investigations into tax rulings granted by Luxembourg to Amazon and McDonald's are ongoing. The US sees these investigations as unfairly targetting US companies and the sheer quantum of the tax assessment in this decision significantly ups the ante.

While the decision requires Ireland to assess Apple for up to EUR13 billion, plus interest, of unpaid taxes, it is arguable that US taxpayers could ultimately foot the bill. Should Apple repatriate its profits back to the US, the tax paid in Ireland may be available as a foreign tax credit in the US to offset Apple's US tax bill. Many blame the tax practices of multinationals on the US tax rules which permit US multinationals to defer US taxes on offshore income. However, the Commission's decision may provide the impetus for US politicians to reach consensus on US tax reform and reduce the tax on profits repatriated to the US.

Despite the headlines, there are some positives for Ireland. The Commission has expressly stated that the decision "does not call into question Ireland's general tax system or its corporate tax rate." No fine or penalty is imposed on Ireland. No changes are required to Ireland's tax regime and Ireland's attractiveness as a competitive, low corporate tax and business-friendly jurisdiction should remain. Ireland's intention to appeal the decision and defend the integrity of the Irish tax system will be welcomed by the international business community. The Irish Government's position is clear: "Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers".

A lengthy appeals process lies ahead which could take up to a decade to conclude.

This article was originally published in The American Lawyer, October 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.