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Big technology firms will have to pay more tax under plans announced by the European Commission.
It said companies with significant online revenues should pay a 3.0 per cent tax on turnover for various online services, bringing in an estimated €5bn (£4.4bn).
The proposal would affect firms such as Facebook and Google with global annual revenues above €750m and taxable EU revenue above €50m.
The move follows criticism that tech giants pay too little tax in Europe.
EU economics affairs commissioner Pierre Moscovici said the "current legal vacuum is creating a serious shortfall in the public revenue of our member states".
He stressed it was not a move against the US or "GAFA" - the acronym for Google, Apple, Facebook and Amazon.
According to the Commission, top digital firms pay an average tax rate of just 9.5 per cent in the EU - far less than the 23.3 per cent paid by traditional companies.
Its figures are disputed by the big tech firms, which have called the tax proposal "populist and flawed".
Countries including the UK and France have accused firms of routing some profits through low-tax EU member states such as Ireland and Luxembourg.
Big US tech companies have argued they are complying with national and international tax laws.
However, the Commission said it wanted to tax companies according to where their digital users are based, reports BBC