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There is no single new EU-wide tax on U.S. technology companies. The main issues to assess are the EU’s Pillar Two minimum-tax rules for large groups, country-by-country digital services taxes (DSTs), separate tax-reporting requirements, and VAT rules that may affect certain platform transactions. A U.S. side-by-side agreement announced in 2026 may change how some U.S.-headquartered groups interact with Pillar Two, but it does not automatically remove every European tax or filing obligation.
Start by mapping your group, revenue, activities, and countries of operation. Then assess each tax and reporting regime separately against the group’s facts and the law currently in force in each country.
What “new taxes in Europe” means for a U.S. technology company
European tax exposure is a set of different rules, not one new levy. Some rules impose tax; others require a group to calculate, report, or exchange tax information. Their scope depends on matters such as group revenue, where entities operate, what digital services they sell, and whether a platform facilitates a transaction.
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| Issue | What it does | Who should assess it |
|---|---|---|
| Pillar Two | Can impose a top-up tax where an in-scope group’s effective tax rate in a jurisdiction is below 15%. | Large multinational and domestic groups with an EU presence. |
| National DSTs | May tax specified digital-service revenue under a country’s own rules. | Companies earning potentially covered revenue in countries with DST legislation. |
| Tax reporting and information exchange | Requires information to be filed or made available to tax authorities; reporting duties are not themselves a tax rate. | Groups within the relevant reporting rules, including groups with Pillar Two obligations. |
| VAT for certain platform transactions | Can affect how VAT is collected or attributed for specified transactions involving an electronic interface. | Platforms and marketplaces whose role and transaction flows fall within the rules. |
The EU’s 2018 proposal for a common digital services tax is on hold; it should not be confused with national DSTs that countries may impose. The Council’s digital taxation overview also describes Pillar One as an initiative intended to reallocate some taxing rights, not as an enacted EU-wide DST.
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Does Pillar Two apply to my company?
The European Commission’s summary says the EU minimum-tax rules cover large domestic or multinational groups with more than €750 million in combined annual financial revenue and an EU presence. The Commission says the rules have applied from 2024. Treat that as an initial scope test, not a company-specific conclusion: group structure, the relevant revenue measure, exclusions, and any applicable safe harbours need to be checked against the rules.
For an in-scope group, the effective tax rate is determined by jurisdiction. If the rate in a jurisdiction is below 15%, a top-up tax may apply through the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR), or a qualified domestic minimum top-up tax. These mechanisms are not interchangeable choices a company can select freely; which rules apply depends on the law and circumstances in the relevant jurisdictions. The European Commission’s Pillar Two overview summarizes the scope, minimum rate, and mechanisms.
Do not use a group-wide headline tax rate to decide whether a top-up may be due. The analysis is jurisdictional, so the tax and income data must be organized in a way that supports the required calculation. Safe harbours may simplify calculations and, if their technical conditions are met, may reduce a jurisdiction’s top-up tax to zero; eligibility should be tested rather than assumed.
Will the 2026 U.S. side-by-side agreement protect us from EU tax?
It may provide relief from specified Pillar Two rules for eligible U.S.-headquartered groups, but it is not a blanket exemption from European tax. On January 5, 2026, the U.S. Treasury announced a side-by-side agreement with more than 145 Inclusive Framework jurisdictions. Treasury’s September 11, 2026 announcement of a revised GloBE Information Return describes a mechanism for a U.S.-headquartered group to elect a safe harbour from the Pillar Two IIR and UTPR.
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The same Treasury announcement says the return also supports reporting for local minimum taxes. That matters: an election affecting IIR and UTPR treatment should not be read as eliminating local minimum-tax obligations, all Pillar Two-related reporting, DSTs, VAT, or other country-level requirements. The announcements describe the U.S. government’s agreement and its reporting mechanism; the group should verify the election conditions, local recognition, and residual obligations that apply to it.
For the announcement and implementation detail, see the Treasury statement of January 5, 2026 and the Treasury statement on the revised return of September 11, 2026. Ask U.S. tax counsel to determine whether the group can and should elect, and coordinate that answer with advisers in the countries where the group operates.
Which countries have digital services taxes?
DST exposure is a country-by-country question. A 2025 European Parliamentary Research Service (EPRS) briefing reported 3% DSTs in France, Italy, and Spain at that time, alongside a €750 million global-revenue threshold and differing domestic thresholds. It also reported that Italy’s domestic threshold was lowered to zero in 2025. Those details are a dated snapshot, not a current or complete country compliance table. The briefing does not establish that every U.S. technology company, every kind of digital revenue, or every service is covered.
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For each market, check the current local law and establish whether the company’s revenue categories, services, thresholds, and other conditions meet that country’s rules. The EPRS figures are useful historical context, but should not be used on their own to accrue tax, register, file, or conclude that a company is outside scope. See the 2025 EPRS briefing.
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What do we need to file?
There is no single filing answer for every U.S. group. Determine reporting obligations separately from tax liability: a company may need to provide information even where a particular calculation results in no top-up tax. The Council says DAC9 establishes a unified filing form for Pillar Two obligations and improves tax-authority information exchange. Map how that reporting requirement interacts with any applicable local minimum-tax reporting and the U.S. side-by-side election.
The European Commission’s June 24, 2026 tax simplification package proposes further changes to tax reporting. The Commission estimates the proposals could save €7.9 billion in compliance costs, but that is an estimate, not realized savings or an enacted change. The package was submitted for consultation with Parliament and adoption by the Council; until adopted, treat its changes as proposals rather than current filing relief. Follow the Council’s digital taxation overview and the Commission’s June 24, 2026 proposal summary.
Could VAT changes affect our platform?
VAT is separate from corporate income tax and Pillar Two. The VAT in the Digital Age directive includes rules for specified electronic-interface transactions, including deemed-supplier treatment. That treatment depends on the platform’s role and the transaction pattern; it does not make every technology company or digital service subject to the same rule.
Selected amendments in Directive (EU) 2025/516 are due to apply from January 1, 2027. That date applies to specified amendments, not to the entire directive. A platform should map which parties sell to which customers, what the interface does in the transaction, and whether the relevant transactions fall within the directive’s scope. Consult the text of Directive (EU) 2025/516 for its exact scope and implementation details.
What should we do now?
- Map the group. Identify the ultimate parent, constituent entities, permanent establishments, and the countries where group entities or platforms operate.
- Run the Pillar Two scope test. Compare the group’s combined annual financial revenue with the €750 million threshold and assess its EU presence, group structure, any applicable exclusions, and safe harbours.
- Build jurisdiction-level tax data. Assemble the income and covered-tax information needed to assess each jurisdiction’s effective tax rate and any potential top-up.
- Get a specific answer on the U.S. election. Ask U.S. tax counsel whether the group is eligible for and should make the side-by-side safe-harbour election. Confirm which local minimum-tax, return, and information-exchange duties remain in each relevant country.
- Test digital revenue market by market. Inventory revenue from online advertising, user data, and digital platforms; check each country’s current DST scope, thresholds, tax base, registration rules, and due dates.
- Review reporting obligations and legislative status. Assess DAC9 and other applicable tax-information reporting. Track the Commission’s June 2026 simplification proposals without treating proposed changes as law.
- Trace platform transactions for VAT. For marketplaces and other electronic interfaces, establish the platform’s role in each transaction and test whether the relevant VAT provisions apply, including amendments scheduled from 2027.
- Validate decisions locally. Have country advisers confirm the applicable law and filing position before making an accrual, filing, restructuring, or pricing decision.
No general summary can determine a particular company’s liability or filing dates without its structure, revenue, jurisdiction-level income and covered taxes, services, platform role, and countries of operation. Those facts, together with current local law, are the basis for a defensible exposure assessment.
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