Legal Alerts/29 Nov 2023

Apple Inc’s Alleged State Aid – Advocate General’s Perspective in Commission v Ireland

In a captivating development earlier this month, Advocate General Pitruzzella (AG) lent his insight to the high-profile case C-465/20 P, involving alleged state aid granted by Ireland to Apple Inc's Irish subsidiaries. The AG now suggests that the European Court of Justice (ECJ) should reconsider the judgement previously passed by the European General Court (GC).

This judgement had previously overruled the European Commission's decision on state aid. The Commission maintains that Ireland has provided fiscal state aid to the Apple Group via an Advance Pricing Arrangement (APA), in violation of Article 107(1) TFEU's conditions. The Commission insists that the APA should adhere to the arm's length principle. This unfolding scenario promises to bring about significant implications for state aid regulations and multinational corporations.

It must be noted that the opinion of the AG is not binding on the ECJ. It is, however, an important illustration on how the relevant rules of law could be applied to alleged aid granted through an APA.

What is an APA?

An APA is an arrangement that determines in advance the treatment of certain transactions in taxation. In addition, an APA can be unilateral (domestic) or bilateral, where two or several jurisdictions (and group companies related to these) are parties to the arrangement. APAs are most often used in a transfer pricing context to resolve the allocation of taxable profit to the jurisdiction(s) involved. The foundation of APAs is rooted in tax treaties or EU law. Interestingly, not all countries have domestic legislation that directly addresses APAs. Finland, for instance, is among those nations that lack specific APA laws.

It should be kept in mind, however, that APAs are negotiated between the competent authorities of each jurisdiction. In other words, a taxpayer is not directly involved in these negotiations or a signing party to the APA. In order to initiate negotiations, a taxpayer must submit a written request that elaborates the covered transactions and relevant details.

Key arguments put forth by the Commission

The opinion of the AG provides support for the Commission’s main arguments. The Commission maintains that the APA granted by Ireland in favour of Apple’s two Irish branches constitutes state aid within the meaning of Article 107(1) TFEU since it enables those branches, to a great degree, to determine their taxable profits in Ireland. According to the Commission, it stems from Irish law that internal transactions between group companies should be conducted at arm’s length (i.e., under normal market conditions).

Ultimately, the case comes down to whether the condition of selectivity is satisfied. The application of the APA will lead to the grant of a selective advantage if the arm’s length principle is an integral part of the Irish legal system. If that is the case, and if the APA does not comply with the requirements of the arm’s length principle, it is possible to infer that Ireland has derogated from the normal rules of taxation and that derogation has led to an advantage for the benefit of Apple’s Irish branches. This derogation, as the Commission maintains, cannot be justified by the internal logic of the system, which is based on the objective to tax all companies incorporated in Ireland, whether they are tax resident, non-resident, integrated or non-integrated.

The AG supports the Commission’s view that, in the context of APAs, Irish law mandates the use of methodologies that do not result in the departure from a reliable approximation of a market-based outcome.

The Commission maintains that the Irish authorities have distorted national law by failing to use methodologies, whilst forming the APA, that would have ensured an outcome at arm’s length. This alleged error in the interpretation and application of national law consequently results in an error in the application of Article 107(1) TFEU. An APA granted at arm’s length would have resulted in a greater taxable base for the two Irish branches.

The Commission’s findings, concerning the inclusion of the arm’s length principle as an integral part of the Irish legal system, are based on a judgement given by the High Court of Ireland in S. Murphy (Inspector of Taxes) v. Dataproducts (Dub.) Ltd. The AG supports the way in which the Commission has applied and interpreted the said judgement.

Important takeaways

  • An APA must comply with the arm’s length principle (i.e., must lead to a reliable approximation of a market-based outcome) only if the principle is an integral part of the national tax regime. In Finland, APAs are limited to arm’s length arrangements.
  • Pursuant to the Member State’s fiscal autonomy, the Member States retain the power to construe their relevant tax regimes – those regimes must be designed in compliance with EU law.
  • As it currently stands, the arm’s length principle does not directly derive from Article 107(1) TFEU – it remains at the discretion of the Member States whether to apply that principle or not.
  • Despite the EU-level controversy, APAs are extremely effective in controlling international tax risks. Finland is a highly advanced APA player; it has concluded approximately 30 APAs with its treaty partners, which is remarkable for a country of its size.

Borenius’  tax and EU teams are happy to answer all questions related to APAs and their potential opportunities for your business, please contact the undersigned or your regular Borenius contact.

Borenius’ Associate Trainee Max Vikman has also participated in the writing of this Legal Alert.

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Additional information

Ilkka Aalto-Setälä



Heikki Wahlroos



Aapo Pessi

Senior Associate