Europe’s New Corporate Tax: What U.S. Firms Need to Know

In a bold move to reshape how the European Union funds its operations, the European Commission has proposed a new corporate revenue-based tax targeting the world’s largest businesses. As EU leaders work to close budget gaps and transition away from national contributions, this policy could significantly impact multinationals—especially U.S. firms with substantial European revenue streams.

What’s in the Proposal?

The proposal, released in early July 2025, introduces a tiered revenue tax system:

Revenue Bracket (EU-generated)	Proposed Tax Rate
€50 million–€100 million	0.1%
€100 million–€500 million	0.15%
Over €500 million	0.3%

The tax would be levied annually and apply to all firms meeting the revenue thresholds, regardless of whether they are headquartered inside or outside the EU. The Commission also indicated that additional levies on electronic waste and tobacco products may follow.

Why Is This Happening Now?

The EU is navigating the sunset of several temporary funding measures, including pandemic-related recovery borrowing. With a 2028 budget deadline looming, the Commission seeks long-term revenue streams that reduce reliance on member states and allow for centralized fiscal planning.

The corporate levy is also seen as a response to political pressure over perceived tax avoidance by multinational firms, particularly in the tech and pharmaceutical sectors.

Implications for U.S. Companies

1. Compliance Complexity

U.S. firms operating in the EU may need to segment revenues more granularly by region and line of business. The levy will likely require enhanced local reporting and disclosures to EU tax authorities.

2. Higher Effective Tax Rates

This new tax would apply in addition to existing corporate income taxes, creating higher marginal burdens for firms with European operations.

3. Potential for Retaliation

If the proposal is passed, it could reignite trade tensions between the U.S. and EU, especially given past disagreements over digital services taxes. U.S. policymakers have already signaled concerns about discriminatory treatment of American firms.

4. OECD Coordination at Risk

This revenue tax may also disrupt efforts to implement the global OECD Pillar 1 and Pillar 2 framework, further complicating multilateral coordination on corporate taxation.

What’s Next?

The proposal must be approved unanimously by all 27 EU member states, making its path to passage politically challenging. Key opposition is expected from low-tax jurisdictions like Ireland and Hungary, which have historically resisted supranational tax efforts.

If passed, the new levy could go into effect as early as January 1, 2026. Final implementation will depend on parallel negotiations around the EU’s 2028 multi-year budget plan.

How Bizora AI Helps Navigate Global Tax Risk

For CPA firms, CFOs, and tax professionals managing multinational clients, Bizora AI offers real-time support to:

• Model the impact of new jurisdictional tax layers

• Generate audit-ready memos explaining foreign tax credit limitations

• Track proposed EU laws and OECD guidance as they evolve

• Identify exposure zones and recommend entity restructuring scenarios

  
  

As global tax complexity grows, Bizora helps ensure your planning stays ahead of policy shifts.