The perception across member states is mixed with countries such as Greece, Romania, and Italy among the top places where respondents are most likely to think corruption is prevalent. Citizens in Denmark, Sweden and Finland think corruption is rare.
"Corruption undermines citizens' confidence in democratic institutions and the rule of law, it hurts the European economy and deprives states from much-needed tax revenue," Cecilia Malmström, European Union's (EU) commissioner for home affairs, said in a press release.
"Member States have done a lot in recent years to fight corruption, but today's report shows that it is far from enough."
Three in four companies say that corruption is a problem in their country, with nepotism and tax fraud amongst the biggest corrupt practices highlighted.
While some EU countries have taken steps to combat corruption, the report says no strategy is in place in others.
(Read more: Corruption worsens amid deep distrust of government)
Public procurement, which accounts for approximately a fifth of the EU's GDP, is an area the report says is "vulnerable to corruption".