Apple has warned that future investment by multinationals in Europe could be hit after it was ordered to pay a record-breaking €13bn (£11bn) in back taxes to Ireland.

The world’s largest company was presented with the huge bill after the European commission ruled that a sweetheart tax deal between Apple and the Irish tax authorities amounted to illegal state aid.

The commission said the deal allowed Apple to pay a maximum tax rate of just 1%. In 2014, the tech firm paid tax at just 0.005%. The usual rate of corporation tax in Ireland is 12.5%.

“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said the European competition commissioner, Margrethe Vestager, whose investigation of Apple’s complex tax dealings has taken three years.

Vestager’s ruling prompted an angry response from Apple and from Ireland and is likely to spark a political row between the US and the EU. The US Treasury said the ruling threatened to damage “the important spirit of economic partnership between the US and the EU”.

In a letter to customers, Apple’s chief executive, Tim Cook, claimed the ruling could deal a blow to big companies investing in Europe: “Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.”

The commission said Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a “head office” that only existed on paper and could not have generated such profits.

The result was that Apple avoided tax on almost all the profit generated from its multi-billion euro sales of iPhones and other products across the EU’s single market. It booked the profits in Ireland rather than the country in which the product was sold.

(The Guardian)