Apple has vowed to overturn a record 13 billion euro (£11.1 billion) bill after European chiefs found it had a sweetheart tax deal in Ireland.
In a landmark ruling following a three-year investigation, Competition Commissioner Margrethe Vestager said the maker of iPads and iPhones paid just 1% tax on its European profits in 2003 and 0.005% in 2014.
"Member states cannot give tax benefits to selected companies - this is illegal under EU state aid rules," the commissioner said.
"The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years."
The Brussels watchdog found the arrangements dating back to the early 1990s were illegal under state aid rules and gave Apple favourable treatment over other businesses.
Ms Vestager said Apple was paying 50 euro in tax on every one million euro of profit it made in 2014.
Ireland's Finance Minister Michael Noonan and Apple chief executive Tim Cook vowed to fight the verdict.
The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.
Mr Noonan said he profoundly disagreed with the verdict and denied doing "deals" with taxpayers.
"Our tax system is founded on the strict application of the law ... without exception," he said.
The ruling also comes just a week before Apple's biggest product launch of the year, with the iPhone 7 expected to be unveiled in San Francisco.
The Competition Commission's investigations have also targeted aggressive tax planning by Starbucks and Fiat, both of which are appealing against rulings ordering them to pay back taxes to the Netherlands and Luxembourg.