The EU Commission accused Apple in 2016 of striking an illegal deal with Irish authorities that allowed the tech giant to pay extremely low tax rates.
A European court annulled has an EU order that Apple repay Ireland $15 billion in back taxes, a major legal setback for Brussels.
A 2016 European Commission ruling said Apple benefited from illegal state aid via two Irish tax rulings that artificially reduced its tax burden for over two decades, to as low as 0.005 percent in 2014.
The EU's General Court said in Wednesday's ruling that ”the commission did not succeed in showing to the requisite legal standard that there was an advantage”.
"The Commission was wrong to declare” that Apple “had been granted a selective economic advantage and, by extension, state aid,” said the Luxembourg-based court, which is the second-highest in the EU.
The Commission's historic ruling against Apple was delivered in August 2016 by Competition Commissioner Margrethe Vestager in a shock decision that put Europe on the map as a scourge of Silicon Valley.
The iPhone-maker and Ireland had appealed the order, which Apple CEO Tim Cook slammed at the time as "total political crap".
Ikea, other deals at risk
Vestager was derided as Europe's "tax lady" by US President Donald Trump because of the case, as well as a series of antitrust fines she imposed on Google.
The defeat for Vestager could weaken or delay pending cases against Ikea's and Nike's deals with the Netherlands, as well as Huhtamaki's agreement with Luxembourg.
Vestager, who has made the tax crackdown a centrepiece of her time in office, saw the same court last year overturn her demand for Starbucks to pay up to 30 million euros in Dutch back taxes.
In another case, the court also threw out her ruling against a Belgian tax scheme for 39 multinationals.
Vestager said she would study the court's judgment and reflect on possible next steps.
The Commission can appeal on points of law to the EU Court of Justice, Europe's top court.
Read the statement by Executive Vice-President @vestager following today's @EUCourtPress judgment on the Apple tax State aid case in Ireland.— European Commission 🇪🇺 (@EU_Commission) July 15, 2020
We will carefully study the judgment and reflect on possible next steps. @EU_Competition
Ireland under spotlight
The commission, which was ordered by the court to pay Apple's and Ireland's legal costs, could still salvage its case, said Dimitrios Kyriazis, head of the law faculty at the New College of Humanities in London.
"Its defeat is very similar to its defeat in the Starbucks cases, that is it won on matters of legal principle and lost due to the allocation of evidentiary onus," he said.
"It is more likely that the Commission will re-adopt a decision against Ireland and Apple and try to show exactly how the tax rulings granted AOE and ASI a selective advantage," he said.
The clear cut decision by the EU's general court could now face another appeal at the top European Court of Justice, with a decision expected no earlier than 2021, but Vestager initially said only that Brussels was studying the judgement.
The EU in 2016 accused Ireland of allowing Apple to park revenue earned in Europe, Africa, the Middle East and India and sparing it almost any taxation.
Brussels said this gave Apple an advantage over other companies, allowing it to avoid Irish taxes between 2003 and 2014 of around $14 billion.
"This was never just about one bad apple - our entire corporate tax system is rotten to the core."— Eurodad (@eurodad) July 15, 2020
Responding to today’s @EUCourtPress #Apple #stateaid judgement @toveryding stresses that the case is yet another example of how global corporate tax rules are failing. #taxjustice pic.twitter.com/w4DL74tjfa
Need for corporate tax reforms?
The European Network on Debt and Development (Eurodad) said the judgment showed the need for corporate tax reform in Europe.
"Today's court decision illustrates how difficult it is to use EU state aid rules to collect tax. If we had a proper corporate tax system, we wouldn’t need long court cases to find out whether it is legal for multinational corporations to pay less than one percent in taxes," its tax justice coordinator Tove Maria Ryding said.
The ruling puts Ireland's tax regime back in the spotlight at a delicate juncture. With attempts to get a global agreement on taxing multinationals buckling, plans for an EU tax could be revived, putting Dublin's low rates in the firing line.
Multinationals, attracted by Ireland's low taxes, employ around 250,000 people in the country, accounting for one in ten workers at the end of last year.
READ MORE: The battle to tax big tech is getting real