International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Local employment motivated Apple Ireland tax deal but it’s an isolated case

The EC is investigating tax arrangements between Ireland and Apple because it thinks the tech company was given a financial advantage in exchange for creating jobs.

While evidence points towards employment being a driving factor in the Apple Ireland case, it is unlikely it had much significance in other tax rulings.

In the public version of the EC’s letter to Ireland, specific reference is made to employment and the role the EC alleges it played in Apple brokering a deal with the Irish government.

“...the reduction of the margin after a certain level above $ [60-70] million would have been motivated by employment considerations, which is not a reasoning based on the arm’s-length principle. In particular, two margins of 20% and 65% are relatively far apart...”

The EC claims that tax margins lacked “economic basis” and were motivated by local job opportunities.

“Apple were certainly a major employer in Ireland and, at the time, Ireland was very focused on building up employment generally,” said Heather Self of Pinsent Masons.

Another aspect which concerns the EC is the length of the advance pricing agreements between Apple and Ireland. The 1991 agreement lasted 16 years while the standard length for arrangements in other European countries rarely exceeds five.

Not a widespread trend

“In relation to other deals, I think most (for example, pharma companies) invested significant resource into Ireland - and indeed, it has become a noted centre of expertise for pharma and IT. I think Apple is relatively unusual in having Irish non-resident companies, with significant profits not taxed anywhere. There may be a small number of other Irish rulings for US MNCs, but I doubt there were many,” said Self.

Although the EC’s claims relating to local employment in the Apple-Ireland deal seem warranted, most tax professionals think this is an isolated occurrence.

“There is no need or possibility of obtaining a ruling or a deal with Irish authorities. Any company doing trade or business in Ireland is subject to the Irish corporate tax and can benefit from the Irish treaty. There is no employment threshold. All intercompany transactions of such an Irish company, including payments made to other jurisdictions, are subject to the regular Irish law and transfer pricing rules based on OECD guidelines. On matters of transfer pricing, it may be possible to obtain an advanced pricing agreement, but these are not all that different than any other jurisdiction,” said one adviser.

Apple’s future

The EC plans to carry out detailed investigations into tax rulings issued by Ireland in 1991 and 2007 in favour of Apple.

“...the Commission’s preliminary view is that the tax ruling of 1990 (effectively agreed in 1991) and of 2007 in favour of the Apple group constitute State aid...The Commission has doubts about the comparability of such State aid with the internal market.”

Two of Apple group’s companies have been asked to provide full financial accounts for 2004 to 2013.



Further reading:

UK Treasury defends Patent Box against EC threat

The potential TP irony of Juncker's EC presidency

EC investigations suggest weakening control of tax authorities

UK and Germany come to agreement over Patent Box signalling European reform of IP regimes

Luxembourg better defines TP rules amid EC investigations

What taxpayers and advisers think about PwC's leaked documents on Luxembourg's tax arrangements

EC investigations could negatively impact legitimate TP arrangements

more across site & bottom lb ros

More from across our site

Governments now have the final OECD guidance on how to implement the 15% global minimum corporate tax rate.
The Indian company, which is contesting the bill, has a family connection to UK Prime Minister Rishi Sunak – whose government has just been hit by a tax scandal.
Developments included calls for tax reform in Malaysia and the US, concerns about the level of the VAT threshold in the UK, Ukraine’s preparations for EU accession, and more.
A steady stream of countries has announced steps towards implementing pillar two, but Korea has got there first. Ralph Cunningham finds out what tax executives should do next.
The BEPS Monitoring Group has found a rare point of agreement with business bodies advocating an EU-wide one-stop-shop for compliance under BEFIT.
Former PwC partner Peter-John Collins has been banned from serving as a tax agent in Australia, while Brazil reports its best-ever year of tax collection on record.
Industry groups are concerned about the shift away from the ALP towards formulary apportionment as part of a common consolidated corporate tax base across the EU.
The former tax official in Italy will take up her post in April.
With marked economic disruption matched by a frenetic rate of regulatory upheaval, ITR partnered with Asia’s leading legal minds to navigate the continent’s growing complexity.
Lawmakers seem more reticent than ever to make ambitious tax proposals since the disastrous ‘mini-budget’ last September, but the country needs serious change.