Has the European Commission Received the “Green Light” to Play by OECD Rules?
Eight years of disputes, one of the largest proceedings before the Court of Justice of the European Union (CJEU), and over €13 billion at stake – this is the case of the European Commission vs. Ireland and Apple Sales International. Does the latest CJEU ruling in Case C-465/20 P revolutionize the approach to transfer pricing?
Eight years of disputes, one of the largest proceedings before the Court of Justice of the European Union (CJEU), and over €13 billion at stake – this is the case of the European Commission vs. Ireland and Apple Sales International. Does the latest CJEU ruling in Case C-465/20 P revolutionize the approach to transfer pricing?
A Brief History:
Ireland issued tax rulings in 1991 and 2007, which, according to the European Commission, constituted illegal state aid for Apple. As a result, the Commission claimed that Apple had “saved” on taxes, with back taxes (plus interest) amounting to a staggering €13 billion.
What Surprised Us About the CJEU Ruling?
The court acknowledged that Irish regulations requiring market-based transactions essentially align with the first step of the OECD’s Authorised OECD Approach (AOA). The catch? AOA became a recognized standard only in 2008, while Apple’s tax rulings were issued much earlier.
This is a pivotal moment. While the CJEU did not explicitly grant the European Commission new powers, it strongly suggested that the alignment of national regulations with OECD guidelines might open the door for the Commission to apply these standards in the context of illegal state aid.
What Does This Mean for Businesses?
We can expect increased pressure for national regulations to comply with international standards. The ruling also serves as a warning signal for EU member states: tax rulings that favor corporations may be closely scrutinized – and challenged – by the European Commission.
One Thing Is Certain:
International transfer pricing standards are gaining importance, and the Apple case underscores the need for transparency in addressing tax matters.