Investing.com - The European Commission (EC) ruled against Ireland's tax arrangements with Apple (NASDAQ:AAPL) on Tuesday, saying they have breached the bloc’s state-aid rules.
The EC judged that the Irish government granted Apple undue tax benefits and may have to repay up to 13 billion euros ($14.5 billion).
Margrethe Vestager, in charge of competition policy, said: "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% on its European profits in 2003 down to 0.005% in 2014," she said.
The EC concluded that the tax treatment in Ireland enabled Apple to avoid taxation on almost all profits generated by sales of Apple products in the entire European Union (EU) single market.
It explained that this was due to Apple's decision to record all sales in Ireland from 2003 to 2014 rather than in the countries where the products were sold.
In this light, the Commission ruled that Ireland must now recover the illegal aid, although other countries may 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 EC explained.
Both Ireland and Apple were expected to appeal the decision.
Shares in Apple slumped more than 2% on Tuesday in pre-market trade.