Is Microsoft Copilot GDPR compliant?

Yes, Microsoft Copilot can be used in line with the GDPR, but not out of the box. Microsoft supplies the foundation: a data processing agreement, no training on your data and the EU Data Boundary. Web search through Bing and Anthropic models are outside that boundary, though. Those two points and SharePoint permissions that are too wide are yours to handle. As of October 2026.

For normal Copilot processing you remain the controller under the GDPR and Microsoft acts as your processor. For the web search queries sent to Bing, Microsoft is the controller. This article covers what regulators have said, what Microsoft commits to and which settings to check before you hand out licences. For pricing and how Copilot compares with ChatGPT, see Copilot vs ChatGPT for business.

What have regulators said about Microsoft 365 and Copilot?

The best known case involves the European Commission itself. In March 2024 the European Data Protection Supervisor found that the Commission's use of Microsoft 365 breached EU data protection rules. In July 2025 the EDPS closed the case, after the Commission had spelled out which data is processed for which purposes, named the recipients of transfers outside the EU and amended its contract with Microsoft (EDPS press release).

The lesson scales down to a 20-person firm. A vendor saying "we comply" is not enough. You have to be able to show what is processed, why and where.

In Germany, the national conference of data protection authorities (DSK) found in November 2022 that controllers could not demonstrate compliant use of Microsoft 365, at least not on the basis of Microsoft's data protection addendum at the time. Its main reason was a lack of transparency about which data Microsoft processes for its own purposes (DSK decision of 24 November 2022).

In November 2025, after negotiations with Microsoft, the data protection authority of Hesse reached a different conclusion: Microsoft 365 can be used in Hesse in compliance with data protection law. Its report reviews Microsoft's data processing agreement, not individual products, involved no technical testing and does not mention Copilot. So the contract is in far better shape than a few years ago, but the check of your own setup stays with you.

In Spain, the data protection authority AEPD published guidance on agentic AI in February 2026, covering systems that act on their own on the user's behalf. It calls excessive permissions for an agent a critical factor. And using AI does not automatically require a data protection impact assessment: it depends on the processing, and an existing assessment may need a review.

What does Microsoft commit to for Copilot?

According to Microsoft's data, privacy and security documentation, Copilot carries the same commitments as the rest of Microsoft 365:

• Prompts, responses and Microsoft Graph data are not used to train foundation models.
• Prompts and responses are stored encrypted alongside your other Microsoft 365 content, under the Data Protection Addendum, Microsoft's processing agreement under Article 28 GDPR.
• For EU customers, Copilot is an EU Data Boundary service, with the two exceptions in the next section.
• Admins set retention for Copilot history in Microsoft Purview. Users can delete their own history.

Microsoft says this covers the paid licence and also the free Copilot Chat in a business context: there too, prompts and responses fall under Enterprise Data Protection and the data processing agreement. Microsoft 365 Copilot has been renamed Microsoft Copilot; Microsoft states the commitments are unchanged.

Where does the EU Data Boundary stop for Copilot?

At two points, both named by Microsoft.

Web search. Copilot turns the prompt into a few search terms and sends them to Bing. Whole documents are not sent, but your company context can shape the terms. Per Microsoft's web search documentation, neither the data processing agreement nor the EU Data Boundary applies to these queries, and Microsoft acts as controller for them. You turn web search off with the "Allow web search in Copilot" policy in the Cloud Policy service. If nobody configures that policy, web search is on, unless optional connected experiences in Office are turned off.

Anthropic models. Anthropic is a Microsoft subprocessor, so the processing agreement applies, except for models labelled "Anthropic models with Data Retention", which are off by default and come under Anthropic's own terms. Its models, however, run outside the EU Data Boundary. In the EU the general setting defaults to "No users" (Anthropic models page). Since April 2026 there is also a separate setting for Copilot in Word, Excel and PowerPoint, which is on by default for EU tenants created after 25 March 2026 (Microsoft documentation). If you set up your tenant this year, check it.

In its guidance on AI, the German DSK considers closed systems preferable. That is a reason to decide both points deliberately instead of leaving them at the default.

Why are SharePoint permissions the biggest risk?

Because Copilot finds everything a user is allowed to see. Microsoft says so directly: Copilot only surfaces content the user has at least view access to. That protects you only if the permissions are right.

A common case in a 20-person engineering firm: the salary spreadsheet has sat in a Teams channel open to "everyone" for years. Nobody went looking. With Copilot, one question like "what do the project engineers earn?" is enough. That is not a Copilot bug. It is an old filing mistake that Copilot makes visible. Before you assign licences, review anything shared with the whole organisation, guest access and open sharing links.

Do we need a DPIA for Copilot?

It depends on what your team uses Copilot for. Under Article 35 GDPR, a data protection impact assessment is required where processing is likely to result in a high risk to people. Drafting, summarising and research often won't reach that bar. Screening job applications or handling health data is a different matter. Write down your screening decision and add Copilot to your record of processing activities. Microsoft offers the "Microsoft Copilot & Copilot Chat Risk Assessment Quickstart" for this.

If you have a works council, bring it in. Copilot stores prompts and responses per user, and admins can review them. In Germany, technical systems like this fall under section 87(1) no. 6 of the Works Constitution Act, which gives the works council a say.

How do you set up Copilot for GDPR compliance?

Before the first user:

1. Review the data processing agreement and add Copilot to your record of processing activities.
2. Decide on web search: off, or on with a clear rule for which questions it suits.
3. Check both Anthropic settings in the Microsoft 365 admin center.
4. Clean up sharing in SharePoint, OneDrive and Teams.
5. Set retention for Copilot history in Purview.
6. Write rules for the team: which data may go in, who reviews the output. A template is in AI policy for employees.
7. Document whether you need a DPIA and why, and involve your works council.

With someone who administers Microsoft 365, this is a manageable job. Without one, it usually falls to your IT provider.

Is there an alternative that doesn't tie you to Microsoft?

Yes, a dedicated AI workspace. It makes most sense when your team doesn't work entirely in Microsoft 365, or when you want the controls in one place instead of spread across the admin center, Cloud Policy and Purview.

Verselo works with models such as Claude, GPT and Gemini, run in EU data centres; chats and documents are processed in the EU and never used for training. One exception, stated plainly: with web search, the search term goes to Google, and admins can switch it off. In Admin & security you decide which models are allowed and how long chats are kept, and the audit log shows what happened. Your documents go into shared or private folders, and answers cite the document and the passage; see Company knowledge. Microsoft 365 connects as a source at launch; see Integrations. What is processed where is on the Security page.

Conclusion

With a business licence and the data processing agreement, Copilot gives you a solid foundation. The gaps are web search, Anthropic models and sharing, and the seven steps above close them. If your business already lives in Microsoft 365 and you set the controls above properly, Copilot can serve you well. The direct comparison is at Verselo or Microsoft 365 Copilot?