The European Commission says illegal tax benefits allowed Apple to pay a rate of 1% on European Union profits in 2003 and 0.005% in 2014.
The findings are a result of a three-year investigation by Competition Commissioner Margarethe Vestager into tax arrangements for Apple, dating back to 1991.
The EC said in a statement that the benefit is “illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland must now recover the illegal aid.”
Both the Government and the company denies any wrongdoing.
Speaking this afternoon, Commissioner Margrethe Vestager explained the reasons for the judgement.
“The Irish branch was subject to normal Irish corporation tax. However, the head office was subject to no tax in Ireland or elsewhere. This was possible under Irish law which, until 2013, allowed for so-called stateless companies.”
“As a result of the allocation method, in the tax rulings, only a fraction of the profits from the Apple Sales International were attributed to the Irish branch. The remainder, the vast majority of profits was attributed to the so-called head office.”
“This means that Apple Sales International, as a whole, paid very little tax on its profits.”
“Let me illustrate for one tax year: In 2011, Apple Sales International made a profit of €16billion – less than €50million were allocated to the Irish branch, the rest, the huge majority, was allocated to the so-called head office where they remained untaxed.”
“This means that Apple’s effective tax rate, in 2011, was 0.05%. TO put that in perspective, it means that for every €1million in profits, it paid just €500 in taxes. This effective tax rate dropped further to as little as 0.005% in 2014, which means that even less was paid in taxes, it was €50 per €1million in profit.”
Apple responded by accusing the European Commission of threatening future investment and job creation on the continent and said it is confident of overturning an order to pay €13bn in back taxes to the Irish Government over a breach of state aid rules.
Apple says this ruling is going to have a “profound and harmful” effects in European investment and job creation which could be bad news for Ireland as the US tech giant is about to create 1,000 jobs in Cork.
Finance Minister Michael Noonan said he disagreed with the verdict.
His office said the Ireland does not do “deals” with taxpayers:
“Our tax system is founded on the strict application of the law … without exception,”