For five years, the OECD's global minimum tax was supposed to be the deal that finally pinned down corporate tax avoidance. 15% floor, 147 countries, no place left to hide. Then January rolled around and the US essentially walked away with a permission slip.
On January 5, 2026, the OECD released what it's calling the "side-by-side" package. The polite version: a framework that lets US-headquartered multinationals keep operating under their existing US tax rules while everyone else follows Pillar Two. The blunter version: the US got a carve-out, and the rest of the world signed off on it to keep the deal from collapsing.
So what does this actually mean? If you work for a US multinational, advise one, or own stock in one — quite a lot. Let's get into it.
What Just Happened
Pillar Two — the global minimum tax — was meant to set a 15% effective tax floor on large multinationals (over €750M in revenue). Countries would enforce it through three mechanisms: a Qualified Domestic Minimum Top-up Tax (QDMTT), an Income Inclusion Rule (IIR), and an Undertaxed Profits Rule (UTPR). The UTPR was the enforcement hammer — if your home country didn't collect the top-up, other countries could.
The US never adopted Pillar Two. Congress didn't pass it, and the Trump administration made it explicit in January 2025 that the OECD deal had "no force or effect" in the US. That left a problem: would Europe and the rest of the world apply the UTPR to US-headquartered companies anyway?
The side-by-side package answers that question. No, they won't.
The Side-by-Side Deal
The package has four moving parts. Here's what each one actually does.
| Component | What It Does | Who It Affects |
|---|---|---|
| Side-by-Side System | Two safe harbours exempting MNEs in "qualified" home regimes from IIR and UTPR abroad | US-headquartered MNEs (currently the only qualified regime) |
| Simplification Measures | Reduces compliance burden for GloBE calculations and reporting | All in-scope MNEs |
| Tax Incentive Safe Harbour | Aligns treatment of substance-based tax incentives globally | MNEs claiming R&D credits, investment incentives |
| Reinforced QDMTT | Confirms domestic top-up taxes remain the primary collection mechanism | Countries hosting low-taxed entities |
The headline change is that first row. If a US multinational has a foreign subsidiary in, say, Ireland that's paying below 15% effective, the standard Pillar Two playbook would say: Ireland collects top-up via QDMTT, and if it doesn't, the US (under IIR) or other jurisdictions (under UTPR) can come for the difference. Under side-by-side, the US group is shielded from IIR/UTPR — Ireland still applies its QDMTT, but no other country can pile on.
Why does that matter? Because the US already has its own anti-avoidance rules: GILTI (now reformed under OBBB), the Corporate Alternative Minimum Tax (CAMT) at 15% on book income for $1B+ corporations, and BEAT. The US argued these collectively achieve Pillar Two's policy goal without the OECD's specific mechanics. The OECD basically agreed — for now.
Why the US Pushed Back
The US objection wasn't just political. There were real technical problems with applying Pillar Two to US groups.
The biggest issue was the UTPR. As written, it would let foreign countries collect tax on US parent-company income — including income earned domestically in the US — if those countries decided the US regime didn't qualify. That's a sovereignty problem, and it's also a constitutional problem (the US can't easily credit foreign taxes that fall on US-source income).
The second issue was that GILTI and CAMT don't compute the way GloBE does. GILTI is calculated globally on a blended basis, not jurisdiction-by-jurisdiction. CAMT uses book income, not adjusted financial accounting income with all the GloBE-specific add-backs. Forcing US groups to also do GloBE calculations would have meant maintaining two parallel tax accounting systems for every foreign subsidiary.
The third issue was political. Republicans in Congress had already introduced retaliatory legislation — the so-called "Section 899" provisions — that would have raised US withholding tax on residents of countries enforcing UTPR against US groups. Europe blinked first.
Honestly? Most international tax practitioners saw this coming. The original Pillar Two framework assumed US participation. Once that assumption broke, either the deal accommodated the US or it functionally collapsed. The side-by-side package is the accommodation.
Who Benefits (and Who Doesn't)
The winners and losers here are pretty asymmetric.
Winners:
- US-headquartered MNEs. No new compliance layer on top of GILTI/CAMT. No risk of extra-territorial UTPR exposure. Estimated compliance cost savings: $50M–$200M per year for the largest groups.
- Tax havens with US ties. Ireland, Singapore, Bermuda subsidiaries of US groups still face local QDMTT but escape additional foreign top-up.
- The OECD framework itself. Better a deal with a US carve-out than no deal at all. Pillar Two implementation continues for non-US groups in 50+ countries.
Losers:
- Non-US MNEs. European, Japanese, Korean, Australian groups still face the full GloBE machinery with no equivalent carve-out. Effective competitive disadvantage versus US peers.
- Countries counting on UTPR revenue. Several EU member states had budgeted for UTPR collections from US groups. Those projections need to come down.
- Tax fairness advocates. The original Pillar Two pitch was a uniform 15% floor with no escape hatches. The side-by-side package opened the first escape hatch, and others may follow.
The Pillar Two Country Tracker (PwC) currently shows the US as the only jurisdiction listed as having a Qualified SbS Regime. That could expand — China, India, and Brazil have all signaled interest in similar carve-outs based on their own minimum tax regimes — but for now, this is a US-specific deal.
What It Means for Tax Planning
If you're advising a multinational or just trying to understand cross-border tax exposure in 2026, here's what changes.
For US MNEs: Your Pillar Two readiness work isn't wasted, but the focus shifts. You still need to comply with QDMTT in every jurisdiction where you have low-taxed entities. You no longer need to model IIR/UTPR exposure for the US parent. CAMT and GILTI remain your binding US-side constraints — and OBBB actually reformed GILTI in ways that interact with CAMT. That's where the real planning work is now.
For non-US MNEs with US operations: Your GloBE position on US subsidiaries needs careful review. US effective tax rates can run below 15% in specific years due to bonus depreciation, R&D credits, and FDII. Your home-country IIR may pull top-up tax from those low-rate periods. The substance-based income exclusion (SBIE) helps, but it's not a complete shield.
For investors: The competitive picture between US and non-US large-caps just shifted modestly in favor of US groups. Not enough to drive sector rotations, but enough to factor into long-term effective tax rate forecasts. Models that assumed Pillar Two would converge effective rates globally need to be updated.
For expats and digital nomads: Pillar Two is a corporate tax framework — it doesn't directly hit individual income tax. But if you're contracting through a foreign holding entity that gets top-up taxed, the cost flows through to your distribution. Worth checking with your accountant if you've structured through Singapore, Ireland, or UAE entities.
The Bottom Line
The OECD blinked. The US held out, threatened retaliation, and got a side-by-side deal that exempts its multinationals from the most intrusive parts of Pillar Two. 147 countries signed off because the alternative was watching the entire framework collapse.
For US-headquartered companies, this is a clear win. Compliance gets simpler, exposure gets smaller, and the existing US international tax regime (GILTI, CAMT, BEAT) becomes the binding constraint instead of GloBE. For non-US groups, it's a mild competitive setback — they still face the full Pillar Two machinery while their American competitors don't.
The bigger question is what happens next. China, India, and Brazil all have arguments for similar carve-outs. If they get them, Pillar Two stops being a global minimum tax and starts being a regional one — applied mostly in Europe and a few aligned jurisdictions. That's a very different deal than the one signed in 2021.
For now though, the framework is intact and operational. The US side-by-side regime is in place. And the era of meaningful UTPR exposure for US multinationals appears to be over before it really began.
Comparing tax burdens across borders? Use our multi-country tax comparison tool to see effective rates and take-home pay across the US, UK, Germany, France, Spain, and Canada at any income level.