EU antitrust regulators have today ruled that Ireland’s tax arrangements with Apple are illegal. It is demanding that the country get Apple to pay back up to 13 billion euros in back taxes, around 15 billion dollars. Last night, it was reported to be in the region of 1.1 billion dollars so this is a substantial increase in the final ruling. The bill is probably subject to appeals but a ruling in the order of billions is a huge deal, even for Apple.

Update: Apple has said that it will appeal the European Commission tax decision, via Reuters.

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The amount covers illicit taxation practices from 2003 to 2014. According to the judgement, Ireland allowed Apple to pay substantially less taxes than other businesses. The report claims Apple’s effective tax rate on international sales was 0.005% by 2014. The system worked by funnelling all of Apple’s European sales through an Irish subsidiary.

In a statement, the European Commission said:

This selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules. The Commission can order recovery of illegal state aid for a ten-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 €13 billion, plus interest.

Apple is yet to respond to the ruling; almost certainly, it will be appealing the judgement. The 13 billion dollar number is equivalent to a quarter of Apple’s yearly profit. Even a significant reduction in the penalty will still be a big hit on Apple’s bottom line.

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