The directive requires EU member states to exchange information automatically on advance cross-border tax rulings and pricing arrangements. This will remove the current discretion given to member states on what information they share, when and with whom, the European Commission said.
Other member states will then be able to request further information on these arrangements, the Commission said.
Under the current system "member states are often unaware of cross-border tax rulings issued elsewhere in the EU which may have an impact on their own tax bases," the Commission said. "The lack of transparency on tax rulings can be exploited by certain companies in order to artificially reduce their tax contribution."
Rulings will have to be shared every six months, and the Commission will now develop a central directory to store the information collected, it said. This directory will be available to all member states and, in a limited degree, to the Commission itself.
The word 'rulings' has been "defined widely so as to capture all similar instruments and irrespective of the actual tax advantage involved", the Commission said.
"It is expected that this initiative will deter tax authorities from offering selective tax treatment to companies once this is open to scrutiny by their peers. This will result in much healthier tax competition," it said.
Jean-Claude Juncker, president of the commission said: "The automatic exchange of information on tax rulings will provide national authorities with insight on aggressive tax planning. It marks a leap forward in our efforts to advance on tax coordination and tax harmonisation. The current system of corporate tax rules is unjust and unfit for purpose. There is a plethora of national rules that allows some companies to win, while others lose out. This unfair competition is anathema to the principles of fair competition within our internal market."
The directive will be adopted at a forthcoming European Council meeting, once the European Parliament has given its opinion and it has been finalised in all official languages
The new rules will apply from 1 January 2017. Until then, existing obligations to exchange information between member states will remain in place.
The European Commission has been investigating tax rulings given to multinationals including Apple and Starbucks following media reports alleging that some companies have received what it described as "significant tax reductions" by way of tax rulings issued by national tax authorities.
It was reported last month that several EU member states were refusing to provide requested tax information to a TAXE committee, which was set up to investigate the tax rulings, citing confidentiality concerns.