New rules to eliminate corporate tax avoidance by large multi-nationals within the European Union will come into force on 1 January.

The Anti-Tax Avoidance Directive contains 5 measures that are legally binding and should be applied by all member states member states.

Under the new measures all member states will now tax profits moved to low-tax countries where the company does not have any genuine economic activity.

Member states will be required to 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.

Member states will also be able to tackle tax avoidance schemes where other anti-avoidance provisions cannot be applied.

The European Commission said the rules would stop companies that exploit the differences in member states' rules to minimise their tax bills by shifting profits within the EU.

Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said: "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."

Further rules governing hybrid mismatches to prevent companies from exploiting mismatches in the tax laws of two different EU countries in order to avoid taxation, as well as measures to ensure that gains on assets such as intellectual property moved from a member state's territory become taxable in that country (exit taxation rules) will come into force as of 1 January 2020.