However, the deal appears on the evidence produced by the Commission to be illegal, and if its full investigation confirms this, the giant iPhone maker would have to refund money to the tax authorities.
Both the Department of Finance and Apple have denied the charges, insisting the arrangement made first in 1991 and renewed and extended in 2007 did not amount to the state giving an illegal advantage to the US multinational.
The Commission put together its case from minutes of meetings and correspondence received from both sides and points out in its 21-page letter that the deal does not fulfil the conditions for a legal agreement on tax.
The minutes of talks between the two in December 1990 show the sums were negotiated rather than arrived at through looking at the actual figures and considering the implications for the outcome, the letter says.
It details that Apple’s tax adviser “mentioned by way of background information that Apple was now the largest employer in the Cork area, with 1,000 direct employees and 500 persons engaged on a sub-contract basis”.
It was stated that the company “is at present reviewing its worldwide operations and wishes to establish a profit margin on its Irish operations”.
While the investigation covers the period from 1991, Apple would be required to pay the Irish state the tax that it avoided through the arrangement, but just for the years 2003 to 2013 because of a 10-year limit.
However, exactly how much this would amount to is unclear — including to the Commission, according to people familiar with the issue.
UCC economist and corporate tax expert Séamus Coffey said that if the investigation centred on just the profits returned by the two companies under review, it would amount to millions of euro.
However, if it was found that the companies held Apple’s intellectual property rights ,“we are into a far different ball-game” where the figure would be more in the line of billions of dollars, he said.
Sinn Féin MEP Matt Carthy said multinationals should be taxed the same as Irish indigenous companies which cannot use international tax planning to cut their tax bills.
Nat O’Connor, econo-mist with the Dublin-based think-tank for action on social change TASC, said that even if tax avoidance schemes were lawful, “they are not victimless”, as the lost revenue affects services, such as education and healthcare in developed and developing countries.
In the Dáil, Fianna Fáil leader Micheál Martin warned that Britain was attacking Irish tax rates in order to steal jobs from the country. Mr Martin said: “Prime minister Cameron was out of order at a Conservative Party conference to have a cut off Ireland. He was completely out of order.”