The inquiry is being led by Joaquín Almunia, the European Union's competition commissioner, who will look into tax strategies used by countries such as Ireland, the Netherlands and Luxembourg. The EU is investigating if these countries were providing illegal state aid to these companies, and if so can ask them to claw back unfair aid.
"In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," Almunia said in a statement. "Under the EU's state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way."
Ireland has become of the preferred destinations for American multinationals to set up their international headquarters, largely due to the large tax breaks and concessions promised that bring prestige, and more importantly, jobs.
Ireland, the Netherlands and Luxembourg are being investigated for their tax arrangements with Apple, Starbucks and Fiat Finance and Trade, respectively.
The EU is also worried about these arrangements because they "could underestimate the taxable profit and thereby grant an advantage to the respective companies by allowing them to pay less tax."
"We have received no selective treatment from Irish officials. Apple is subject to the same tax laws as scores of other international companies doing business in Ireland," said the company in an emailed statement.
Tax policy has been one of the most important issues in the 28 state political bloc; changes to EU tax rules require unanimous approval from all member nations. But despite that many members have stuck to their own corporate tax laws. The inquiry also comes amid a crackdown on tax-avoidance tactics employed by companies at a time when governments are struggling to increase revenue and decrease deficit.