The European Commission's two-year investigation into Apple's advantageous tax deal with Ireland has concluded with the EC ruling that the company received illegal state aid and must pay back €13bn to the Irish government.
The EC claimed that the tax deal was designed to persuade the company to site its European corporate base in the Irish Republic, and that Apple used it to funnel the profits from all its European Union activities via Ireland.
The declaration was made by EU competition commissioner Margrethe Vestager in a 130-page ruling following an investigation started in June 2014.
Vestager claimed that Apple attributed almost all profits made in the EU to a head office in Ireland, which existed only on paper and could not have generated such profits.
"Member states cannot give tax benefits to selected companies. This is illegal under EU state aid rules. The EC'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," said Vestager.
"In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of one per cent on its European profits in 2003 down to 0.005 per cent in 2014."
Apple established this tax-efficient structure in Ireland in 1991, but only 10 years of illegal state aid can be ordered to be repaid under EU rules.
"The EC can order recovery of illegal state aid for a 10-year period preceding the EC's first request for information in 2013. Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13bn, plus interest," said the EC.
"The tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire EU Single Market. This is due to Apple's decision to record all sales in Ireland rather than in the countries where the products were sold.
"This structure is, however, outside the remit of EU state aid control. If other countries were to require Apple to pay more tax on profits of the two companies over the same period under their national taxation rules, this would reduce the amount to be recovered by Ireland."
The decision is bound to spark a reaction from the US, which has already suggested that the EC harbours an anti-US bias in the decisions of its competition authorities.
Other companies, meanwhile, take advantage of tax laws introduced in Luxembourg when current EU president Jean-Claude Juncker was prime minister.
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