Apple Must Pay €13bn in Back Taxes, European Commission Rules

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An Apple logo displayed at the firm's World Wide Developers Conference in San Francisco, California, June 13. Apple has been ordered to pay €13bn in back taxes. REUTERS/Stephen Lam

Ireland has been ordered by the European Commission to recover €13 billion ($14.5 billion) from Apple in back taxes.

The ruling follows a three-year investigation into the U.S. company's tax arrangements in Europe, which found that tax rulings since 1991 issued by Ireland artificially lowered the tax paid by Apple. Selective tax agreements such as these are illegal under EU state aid rules.

According to the Commission, Apple paid as little as 0.005 percent corporate tax on its annual profits. This favorable tax treatment in Ireland effectively allowed Apple to avoid taxation on almost all profits generated by sales of Apple products in the EU.

"Member states cannot give tax benefits to selected companies—this is illegal under EU state aid rules," said Commissioner Margrethe Vestager. "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.

"In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 percent in 2014."

Ireland is expected to appeal the decision after Finance Minister Michael Noonan said he disagreed "profoundly" with the ruling.

"The decision leaves me with no choice but to seek cabinet approval to appeal," Noonan said in a statement. "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."