Apple should pay $13 billion (£11bn) in back taxes to the Irish government, the European Commission has ruled.
Irish authorities cut a sweetheart deal with the American tech giant which enabled it to pay a maximum of one per cent corporation tax.
Corporation tax for other businesses in Ireland is set at 12.5 per cent.
The ruling that Apple received preferential treatment amounting to illegal state aid follows a three-year probe into the way in which the firm channels its European sales through Ireland.
EU competition commissioner Margrethe Vestager said: “Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules.
“The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.”
Apple and the Irish government plan to appeal the ruling. If unsuccessful, the Irish authorities will then set the exact amount Apple will have to repay.
“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” Apple said in a statement.
“The Commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money.
“It will have a profound and harmful effect on investment and job creation in Europe.
“Apple follows the law and pays all of the taxes we owe wherever we operate. We will appeal and we are confident the decision will be overturned.”
The Commission found that Apple paid around one per cent tax on its European profits in 2003 and just 0.005% in 2014.
Ireland’s finance minister Michael Noonan stated: “I disagree profoundly with the Commission.
“The decision leaves me with no choice but to seek cabinet approval to appeal.
“This is necessary to defend the integrity of our tax system; to provide tax certainty to business; and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation.”
Apple has cash reserves of more than $200bn (£153bn).
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