New rules are coming into force from January 1st 2019 across the European Union, to clamp down on corporate tax avoidance.

It means all member states, including Ireland, will apply new legally binding anti-abuse measures that target the main forms of tax avoidance practiced by large multinationals.

Countries will now tax profits moved to low-tax states, where the company does not have any genuine economic activity.

States will also limit the amount of net interest expenses that a company can deduct from its taxable income to "discourage companies from using excessive interest payments to minimise taxes".

Pierre Moscovici is European Commissioner for Economic and Financial Affairs.

"The commission has fought consistently and for a long time against aggressive tax planning.

"The battle is not yet won, but this marks a very important step in our fight against those who try to take advantage of loopholes in the tax systems of our member states to avoid billions of euros in tax."

The rules are based on global standards developed by the OECD in 2015.

The European Commission say they should help to prevent profits being "siphoned out of the EU where they go untaxed".

While further rules, to prevent companies from exploiting tax laws of two different EU countries in order to avoid taxation, will come into force from January 1st 2020.