Facebook is braced for a $5.7billion tax bill in the US over its Irish subsidiary – and tax changes in Europe could force it to overhaul its business, the company said.

Last week, the social media giant disclosed the litany of tax issues it is facing in its first half results.

Its shares fell on Thursday by more than 20 per cent, wiping $120billion (£90billion) off its market value as growth at the firm slowed.

Tax affairs: Facebook UK paid just £2.5million in corporation tax last year

The US company, led by Mark Zuckerberg, is being pursued by the tax authorities in the US over its Irish arm, which owns the global rights to the income from Facebook's business outside America.

US tax officials believe these were handed to the Irish division at a knockdown price to minimise tax liabilities and are seeking payments of $5billion for 2010 and $680million for 2011 to 2013. Facebook contests the bills.

The arrangement had implications in Britain. Under the structure, UK advertisers placing ads aimed at UK users paid the Irish business – a structure that kept payments to the Revenue at a minimal level.

Demands: Facebook boss Mark Zuckerberg, pictured with wife Priscilla Chan

The firm has since moved many UK payments onshore following a British Government crackdown.

Facebook says this will increase its UK corporation tax bill. Facebook UK paid just £2.5million in corporation tax last year.

The Internal Revenue Service, America's equivalent of Revenue & Customs, is investigating Facebook's US tax returns for 2014, 2015 and 2016.

The Irish tax authorities are investigating its tax returns between 2012 and 2015.

Facebook said changes to tax regimes for digital firms could 'require us to change the manner in which we operate' and it warned that the European Commission's investigations into tax breaks awarded by EU member states could affect the company.

Competition commissioner Margrethe Vestager has ordered Apple to pay the Irish tax authorities €13billion, saying it struck an unfair deal with the US tech giant.

Facebook declined to comment.