Apple ordered to pay back taxes of €13bn

European Commission demands that Apple pay back illegal state aid

Apple has been order to pay back €13bn in illegal state aid it was given by the Irish government as an inducement to establish its head office in Ireland. The state aid was given in the form of a tax deal, which the company used to funnel its revenues and profits through Ireland and, thereby, to avoid tax.

The declaration was made by Margrethe Vestager, the European Commissioner for Competition, in a 130-page ruling, following an investigation started in June 2014.

Vestager claims that Apple attributed almost all profits made in the European Union to a head office based in Ireland, which only existed on paper and which could, therefore, not have generated such profits.

"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," said Vestager.

She continued: "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."

While the company established its tax-efficient structure in Ireland in 1991, under EU rules only 10 years of illegal state aid can be ordered to be repaid.

"The commission can order recovery of illegal state aid for a 10-year period preceding the commission'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," claimed the Commission.

It continued: "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."