Repayment will be made to an escrow account operated by Bank of New York Mellon, and held there pending Ireland's appeal of the European Commission's state aid ruling against it of August 2016. Amundi, BlackRock Investment Management (UK) Ltd and Goldman Sachs Asset Management International will provide investment management services, according to the announcement.
Apple is expected to have repaid the full amount by the end of September, according to Irish finance minister Paschal Donohoe.
The Irish government "fundamentally disagrees" with the Commission's finding that it granted undue tax benefits to Apple, in breach of EU state aid rules, Donohue said.
"However, as committed members of the European Union, Ireland is intent on complying with our binding legal obligations in this regard," he said.
"This is the largest recovery fund of its kind ever to be established and due to the complexity of such, together with our duty to comply with EU procurement rules, it has taken some time to get to this point. I am happy that I can sign the deed with Apple today, which has been the subject of difficult and intensive work," he said.
Ireland expects its appeal against the Commission's ruling to be heard in autumn, according to the Irish Times.
"While the repayment of these sums by Apple to Ireland is of significance, it is clear that both Apple and Ireland intend to continue the challenge to the Commission decision that unlawful state aid has been provided," said state aid expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-Law.com. "The repayment into the escrow account will only be pending the outcome of that appeal, but we will need to wait some time for the final outcome to be known."
The Commission's state aid decision of August 2016 followed a three-year investigation into two tax rulings issued by Ireland in favour of two Apple group companies: Apple Sales International (ASI) and Apple Operations Europe. These companies were both incorporated in Ireland, but were not treated as Irish tax resident because Irish law at the time regarded them as US tax resident even though they did not have any taxable presence in the US or any other tax jurisdiction.
The tax rulings concerned the method of allocation of profit to the Irish branches of these companies. The ruling meant that almost all of the sales profits recorded by the two companies were internally attributed to a head office of ASI that the Commission said "existed only on paper and could not have generated such profits". The profits allocated to the head office were not subject to tax in any country and, as a result, the Commission said that Apple only paid an effective tax rate of between 0.005% and 1%.
Irish law has since been amended, and Apple has now changed its operating structure.
"What really seems to have irked the Commission was that a huge proportion of Apple's profits from its EU activities were not being taxed anywhere," said tax expert Catherine Robins of Pinsent Masons.
"Now that the US tax rules have changed, Apple will be paying some US tax on its European profits; and if the Commission's state aid challenge is upheld, Apple may end up paying less US tax than it would otherwise have done. This brings the US into even more direct conflict with the EU as regards who gets their hands on the lucrative tax revenues from the European operations of US multinationals," she said.