The European Commission is to open a formal investigation into Fiat France in relation to its tax arrangements in Ireland, the Netherlands and Luxembourg.

Fiat UK is not involved in the EC investigation.

The EC has also announced it is investigating Starbucks and Apple for the same reason and will be looking at whether the companies’ tax affairs breach European Union rules.

The EU said its investigation follows reports some companies have received significant tax reductions through rulings by national authorities.

Joaquin Almunia, competition commissioner, said: "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes.

“Countries in Europe cannot allow certain firms to pay less tax than they should.”