iPhone 6

European Union regulators have announced in a preliminary ruling that the tax deals brokered between Apple and the Irish government may be constituted as illegal state aid, which would result in hefty fines in back taxes for the Cupertino giant. The deals in question were agreed upon in 1991 and 2007, and the EU Commission believes that these deals allow Apple to pay a much lower tax rate than normal.

The commission's preliminary view is that the tax ruling of 1991 and of 2007 in favour of the Apple group constitute state aid. That advantage is obtained every year and ongoing. Accordingly, the commission is of the opinion that through those rulings the Irish authorities confer an advantage on Apple. At this stage, the commission has no indication that the contested measure can be considered compatible with the internal market.

The EU commission has requested the Irish government for more information regarding its tax arrangements with Apple, and should the commission conclude that the deal is illegal, it can fine Ireland up to €1 billion ($1.26 billion). Apple, meanwhile, may be liable for back taxes from 2003 onwards.

Apple for its part has mentioned that it does not benefit unfairly from its deal with the Irish government. Here's the full statement as provided to Business Insider.

Apple is proud of its long history in Ireland and the 4,000 people we employ in Cork. They serve our customers through manufacturing, tech support and other important functions. Our success in Europe and around the world is the result of hard work and innovation by our employees, not any special arrangements with the government. Apple has received no selective treatment from Irish officials over the years. We're subject to the same tax laws as the countless other companies who do business in Ireland.

Since the iPhone launched in 2007, our tax payments in Ireland and around the world have increased tenfold. To continue that growth and the benefits it brings to the communities where we work and live, we believe comprehensive corporate tax reform is badly needed.

Along with Apple, the EU commission is also looking into the dealings between car manufacturer Fiat and the country of Luxembourg, as well as tax agreements between coffee chain Starbucks and Netherlands.

Source: EU commission; Via: Wall Street Journal