Europe hits Apple with $14.6 billion tax bill

Ireland must recover up to 13 billion euros ($14.6 billion) in unpaid taxes from Apple, Europe's top regulator ruled on Tuesday.

 

The tax ruling is by far the biggest the European Union has ever made regarding a single company, and it could spark a huge transatlantic row over how Europe treats big U.S. companies.

Apple shares fell almost 3% in premarket trading. The company will appeal the decision. It said the ruling upended the international tax system and would damage jobs and investment in Europe. Ireland also intends to appeal.

The Commission said the Irish government had granted illegal state aid to Apple (AAPL, Tech30) by helping the tech giant to artificially lower its tax bill for more than 20 years. 

"Member States cannot give tax benefits to selected companies -- this is illegal under EU state aid rules," said Commissioner Margrethe Vestager, Europe's top antitrust official.

Apple paid tax at 1%, or less, on profits attributed to its subsidiaries in Ireland, well below the 35% top rate in the United States and even well below Ireland's 12.5% rate. 

That prompted complaints by both European and U.S. lawmakers, who argued the deal gave Apple an unfair advantage in exchange for creating jobs in Ireland. CEO Tim Cook was even called to testify on Apple's tax deal before a Senate committee in 2013.

The bill for tax benefits, plus interest, covers 2003 to 2014. Apple has more than $231 billion in cash on its balance sheet to cushion the blow.

Apple (AAPL, Tech30) is not the only American company that has recently found itself under scrutiny over its European tax affairs.

The European Commission ordered Starbucks and Fiat Chrysler to repay millions in taxes last October.

Starbucks (SBUX) has to pay back up to 30 million euros it saved thanks to a sweetheart tax deal with the Netherlands. Fiat Chrysler (FCAM) was ordered to repay a similar amount after a similar deal with Luxembourg.

Both companies have appealed the decisions. 

The EU is also probing the tax arrangements of Amazon (AMZN, Tech30) and McDonald's (MCD). Google (GOOG) is under investigation over its taxes in France and a couple of other European countries.

The ruling against Apple's tax deal comes despite a stern warning from the U.S. last week. The Treasury Department urged the European Commission to stop its tax crackdown on American companies, saying it would consider "potential responses" if Brussels doesn't change course.