The European Commission has confirmed it is investigating Ireland's corporate tax arrangements with Apple.
Authorities in Brussels are examining claims that Ireland negotiated a so-called 'sweetheart deal' with the technology giant.
The probe will also target Luxembourg and the Netherlands.
EU countries have promised to crack down on loopholes which have allowed companies such as Amazon, Starbucks and Apple to pay tiny amounts of tax on their European operations.
Last November, the Commission unveiled plans to prevent firms from setting up 'letter-box' companies in different countries to reduce their tax bill.
EU competition chief Joaquin Almunia will lead the investigation. Mr Almumia has previously described the practice of "aggressive tax planning" as going against the principles of the EU's single market and "socially untenable".
"Because of the gaps in national tax laws, many of the largest multinational companies pay very low taxes, and they don't need to break the law to do it," he told the European Competition Forum earlier this year.
Apple paid a tax rate of 3.7 percent on profits made outside the US by designating its office in Cork as it's international headquarters.
In a statement the Department of Finance said it's confident there is no state aid breach, and says it will defend its position "vigorously".
“The European Commission has today announced that it will open formal State Aid investigations in a number of Member States. This announcement is part of a wider investigation by the European Commission encompassing tax rulings and patent box regimes in a number of member states which has been on-going for some time.
In the case of Ireland, our understanding of the particulars of this case is that the Commission is focussing on advance opinions provided to a company a number of years ago which address the calculation of the taxable base of profits of this company.
Ireland is confident that there is no state aid rule breach in this case and we will defend all aspects vigorously. However, we understand that the European Commission has a responsibility to investigate potential breaches of state aid rules, so we will continue to do everything we can to ensure that they have the full information they require.
Meanwhile in a statement Apple says
“Apple is proud to have been doing business in Cork, Ireland since 1980. We have grown our workforce to more than 4000 employees, who serve our customers through manufacturing, tech support and other critical functions. These employees play an important part in Apple’s success and continued growth in Ireland. Success and growth come from the hard work of our Irish employees not from any special tax deal with the Irish government. We have received no selective treatment from Irish officials. Apple is subject to the same tax laws as scores of other international companies doing business in Ireland.
Apple pays every euro of every tax that we owe. Since the iPhone launched in 2007, our taxes in Ireland have increased tenfold.”
