Ireland v European Commission.

JurisdictionEuropean Union
CourtGeneral Court (European Union)
Docket NumberT-778/16
Date15 July 2020
Celex Number62016TJ0778

JUDGMENT OF THE GENERAL COURT (Seventh Chamber, Extended Composition)

15 July 2020 (*)

(State aid — Aid implemented by Ireland — Decision declaring the aid incompatible with the internal market and unlawful and ordering recovery of the aid — Advance tax decisions (tax rulings) — Selective tax advantages — Arm’s length principle)

In Cases T‑778/16 and T‑892/16,

Ireland, represented by K. Duggan, M. Browne, J. Quaney, and A. Joyce, acting as Agents, and by P. Gallagher, M. Collins, Senior Counsel, P. Baker QC, S. Kingston, C. Donnelly, A. Goodman and B. Doherty, Barristers,

applicant in Case T‑778/16,

supported by

Grand Duchy of Luxembourg, represented by T. Uri, acting as Agent, and by D. Waelbroeck and S. Naudin, lawyers,

intervener in Case T‑778/16,

Apple Sales International, established in Cork (Ireland),

Apple Operations Europe, established in Cork,

represented by A. von Bonin and E. van der Stok, lawyers, D. Beard QC, and A. Bates, L. Osepciu and J. Bourke, Barristers,

applicants in Case T‑892/16,

supported by

Ireland, represented by K. Duggan, J. Quaney, M. Browne, and A Joyce, and by P. Gallagher, M. Collins, P. Baker, S. Kingston, C. Donnelly, and B. Doherty,

intervener in Case T‑892/16,


European Commission, represented by P.-J. Loewenthal and R. Lyal, acting as Agents,


supported by

Republic of Poland, represented by B. Majczyna, M. Rzotkiewicz and A. Kramarczyk-Szaładzińska, acting as Agents,

intervener in Case T‑778/16,

and by

EFTA Surveillance Authority, represented by C. Zatschler, M. Sánchez Rydelski and C. Simpson, acting as Agents,

intervener in Case T‑892/16,

APPLICATIONS under Article 263 TFEU for annulment of Commission Decision (EU) 2017/1283 of 30 August 2016 on State aid SA.38373 (2014/C) (ex 2014/NN) (ex 2014/CP) implemented by Ireland to Apple (OJ 2017 L 187, p. 1),

THE GENERAL COURT (Seventh Chamber, Extended Composition),

composed of M. van der Woude, President, V. Tomljenović (Rapporteur), A. Marcoulli, J. Passer and A. Kornezov, Judges,

Registrar: S. Spyropoulos, Administrator,

having regard to the written phase of the procedure and further to the hearing of 17 and 18 September 2019,

gives the following


I. Background to the dispute

A. History of the Apple Group

1. The Apple Group

1 The Apple Group, founded in 1976 and based in Cupertino, California (United States), is composed of Apple Inc. and all companies controlled by Apple Inc. (collectively, ‘the Apple Group’). The Apple Group designs, manufactures and markets, inter alia, mobile communication and media devices, personal computers and portable digital music players, and sells software, other services, networking solutions and third-party digital content and applications. The Apple Group markets its products and services to consumers, businesses and governments worldwide, through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and resellers. The Apple Group’s global business is structured around key functional areas centrally managed and directed from the United States by executives based in Cupertino.

2 Commission Decision (EU) 2017/1283 of 30 August 2016 on State aid SA.38373 (2014/C) (ex 2014/NN) (ex 2014/CP) implemented by Ireland to Apple (OJ 2017 L 187, p. 1) (‘the contested decision’), concerns two advance tax decisions adopted by the Irish tax authorities in relation to two companies forming part of the Apple Group.

2. ASI and AOE

(a) Company structure

3 Within the Apple Group, Apple Operations International is a fully owned subsidiary of Apple Inc. Apple Operations International fully owns the subsidiary Apple Operations Europe (AOE), which in turn fully owns the subsidiary Apple Sales International (ASI). ASI and AOE are both companies incorporated in Ireland, but are not tax resident in Ireland.

4 As stated in recitals 113 to 115 of the contested decision, a significant number of members of the boards of directors of AOE and ASI were directors employed by Apple Inc. and based in Cupertino. Excerpts from resolutions and minutes from annual general meetings and board meetings of ASI and AOE are reproduced in recital 115 (Tables 4 and 5) of that decision. The resolutions of the boards of directors concerned, inter alia, on a regular basis, the payment of dividends, the approval of directors’ reports, and the appointment and resignation of directors. Less frequently, those resolutions concerned the incorporation of subsidiaries and powers of attorney authorising certain directors to carry out various activities such as managing banking, relationships with governments and other public offices, audits, insurance, renting, purchase and sale of assets, taking delivery of goods, and commercial contracts.

(b) The cost-sharing agreement

5 Apple Inc., on the one hand, and ASI and AOE, on the other, were bound by a cost-sharing agreement (‘the cost-sharing agreement’). The shared costs concerned, inter alia, the research and development (R&D) of technology incorporated in the Apple Group’s products. The initial cost-sharing agreement was signed in December 1980. The parties to that agreement were Apple Inc. (then Apple Computer Inc.) and AOE (then Apple Computer Ltd (ACL)). In 1999, ASI (then Apple Computer International) became a party to that agreement. During the period relevant to the investigation referred to in the contested decision, various amendments were made to the cost-sharing agreement, in order in particular to take into account changes in the applicable regulatory framework.

6 Under that agreement, the parties agreed to share the costs and the risks associated with the R&D concerning intangibles following development activities connected with the Apple Group’s products and services. The parties also agreed that Apple Inc. remained the official legal owner of the cost-shared intangibles, including the Apple Group’s intellectual property (‘IP’) rights. In addition, Apple Inc. granted ASI and AOE royalty-free licences enabling those companies, inter alia, to manufacture and sell the products concerned in the territory that had been assigned to them, that is to say, the world apart from North and South America. Furthermore, the parties to the agreement were required to bear the risks resulting from that agreement, the main risk being the obligation to pay the development costs relating to the Apple Group’s IP rights.

(c) The marketing services agreement

7 In 2008, ASI concluded a marketing services agreement with Apple Inc., in connection with which Apple Inc. undertook to provide marketing services to ASI, including the creation, development and production of marketing strategies, programmes and advertising campaigns. ASI undertook to remunerate Apple Inc. for those services by payment of a fee corresponding to a percentage of the ‘reasonable costs incurred’ by Apple Inc. in relation to those services, plus a mark-up.

3. The Irish branches

8 ASI and AOE set up Irish branches. AOE also had a branch in Singapore, which ceased its activities in 2009.

9 ASI’s Irish branch is responsible for, inter alia, carrying out procurement, sales and distribution activities associated with the sale of Apple-branded products to related parties and third-party customers in the regions covering Europe, the Middle East, India and Africa (EMEIA) and the Asia-Pacific region (APAC). Key functions within that branch include the procurement of Apple-branded finished products from third-party and related-party manufacturers, distribution activities associated with the sale of products to related parties in the EMEIA and APAC regions and with the sale of products to third-party customers in the EMEIA region, online sales, logistics operations, and operating an after-sales service. The European Commission stated (recital 55 of the contested decision) that many activities associated with distribution in the EMEIA region were carried out by related parties under service contracts.

10 AOE’s Irish branch is responsible for the manufacture and assembly of a specialised range of computer products in Ireland such as iMac desktops, MacBook laptops and other computer accessories, which it supplies to related parties for the EMEIA region. Key functions within that branch include production planning and scheduling, process engineering, production and operations, quality assurance and quality control, and refurbishing operations.

B. The contested tax rulings

11 The Irish tax authorities adopted advance tax decisions, known as ‘tax rulings’, in relation to certain taxpayers who had made requests to that effect. By letters of 29 January 1991 and 23 May 2007 (collectively, ‘the contested tax rulings’), the Irish tax authorities indicated their agreement with the proposals made by the Apple Group’s representatives concerning the chargeable profits of ASI and AOE in Ireland. Those rulings are described in recitals 59 to 62 of the contested decision.

1. The 1991 tax ruling

(a) The tax base of ACL, AOE’s predecessor

12 By letter of 12 October 1990, addressed to the Irish tax authorities, the Apple Group’s tax advisors described ACL’s operations in Ireland, indicating the functions performed by its Irish branch established in Cork (Ireland). In addition, it was stated that the branch was the owner of the assets relating to the manufacturing activities, but that AOE retained ownership of the materials used, works in progress and finished products.

13 Following the letter from the Apple Group’s representatives to the Irish tax authorities of 16 January 1991 and the response from those authorities of 24 January 1991, those authorities confirmed, by letter of 29 January 1991, the terms proposed by the Apple Group, as described below. Thus, pursuant to those terms, confirmed by the Irish tax authorities, ACL’s chargeable profit in Ireland, relating to income from its Irish branch, was calculated on the basis of the...

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