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Apple has claimed that the European Commission erred in its interpretation of Irish law and violated the principle of legal certainty in ordering the recovery of alleged illegal state aid granted to Apple.
Apple's 14-point appeal against the Commission, submitted in December 2016, has now been published on the European Court of Justice's website. Apple asked that the Court annul the Commission's August 2016 decision either in full or in part, and order the Commission to pay the company's legal costs.
The decision concerns two Opinions issued by the Irish Revenue on January 29, 1991, and May 23, 2007, to Apple Sales International (ASI) and Apple Operations Europe (AOE). The Opinions related to the method by which ASI and AOE allocate profit to their respective branches.
After a two-year state aid investigation, the Commission concluded that the rulings had "substantially and artificially lowered the tax paid by Apple in Ireland since 1991." It ordered Ireland to recover "unpaid taxes" from Apple for the years 2003-2013 of up to EUR13bn (USD13.7bn), plus interest.
The appeal stated that, as non-resident Irish companies, ASI and AOE were liable to pay Irish corporation tax under Section 25 of the Taxes Consolidation Act 1997 only on "chargeable profits" attributable to activities performed by their Irish branches. It said that the two Opinions provided by the Irish Revenue reflected the branches' chargeable profits and that the Commission was also incorrect in finding that profit allocation under Section 25 must be under the arm's length principle.
Under Section 25, "A company not resident in the State shall not be within the charge to corporation tax unless it carries on a trade in the State through a branch or agency, but if it does so it shall, subject to any exceptions provided for by the Corporation Tax Acts, be chargeable to corporation tax on all its chargeable profits wherever arising."
Apple further argued that the Commission failed to recognize that the companies' "profit-driving activities, in particular the development and commercialization of intellectual property, were controlled and managed in the United States." It said the profits from those activities were attributable to the US and not to Ireland, and that the Commission had not recognized that the Irish branches "carried out only routine functions and were not involved in the development and commercialization of Apple IP which drove profits."
According to Apple, by ordering the recovery of the alleged aid under "an unforeseeable interpretation of state aid law," the Commission violated the principle of legal certainty. It also contended that the Commission had exceeded its competence under the state aid provisions of the Treaty on the Functioning of the European Union, "by attempting to redesign Ireland's corporate tax system."
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