UK and International Tax news

OECD Publishes Side by Side Package on Global Minimum Tax

Wednesday 21st January 2026

Following months of intense negotiations, the OECD has published a comprehensive package for a “side by side” arrangement intended to preserve the gains achieved so far in the global minimum tax framework and protect the ability for all jurisdictions, particularly developing countries, to have first taxing rights over income generated in their jurisdictions.

The package includes five key components:

  • a series of simplification measures will reduce compliance burdens for multinational enterprises and tax authorities in calculating and reporting under the global minimum tax rules.
  • alignment of the treatment of tax incentives globally through the introduction of a new targeted substance-based tax incentive safe harbour.
  • new safe harbours are available to MNE groups having an ultimate parent entity located in an eligible jurisdiction which meets minimum taxation requirements.
  • an evidence-based stocktake process to ensure a level playing field is maintained for all Inclusive Framework Members.
  • reinforcement of the objective that qualified domestic minimum top-up tax regimes remain a primary mechanism in the global minimum tax framework for ensuring the protection of local tax bases, particularly in developing countries.

The OECD package follows months of negotiations since the G7 statement issued in June 025 on global minimum taxes which made reference to US concerns regarding the Pillar 2 rules agreed by the OECD/G20 Inclusive Framework on BEPS and a proposed ‘side-by-side’ solution under which US parented groups would be exempt from the Income Inclusion Rule and Undertaxed Profits Rule in recognition of the existing US minimum tax rules to which they are subject.

Following an analysis of respective minimum tax regimes, consideration of proposed changes to the US international tax system based on the Senate amendment of H.R. 1 (introduced June 16, 2025), the One Big Beautiful Bill Act (OBBBA), the removal of s.899 in the Senate version of the OBBBA, and consideration of the success of Qualified Domestic Minimum Top-up Tax implementation and its impact, it became clear that a side-by-side system could preserve important gains made by jurisdictions in the IF in tackling base erosion and profit shifting and provide greater stability and certainty in the international tax system moving forward.

The G7 statement referred to the following accepted principles:

  • exclusion of U.S. parented groups from the UTPR and the IIR in respect of both their domestic and foreign profits.
  • include a commitment to ensure any substantial risks that may be identified with respect to the level playing field, or risks of base erosion and profit shifting, are addressed to preserve the common policy objectives of the side-by-side system.
  • work to deliver a side-by-side system would be undertaken alongside material simplifications to the overall Pillar 2 administration and compliance framework.
  • work to deliver a side-by-side system would be undertaken alongside considering changes to the Pillar 2 treatment of substance-based non-refundable tax credits that would ensure greater alignment with the treatment of refundable tax credits.

Delivery of a side-by-side system is intended to facilitate further progress to stabilize the international tax system, including a constructive dialogue on the taxation of the digital economy and on preserving the tax sovereignty of all countries.

The G7 also recognised the removal of s.899 was crucial to this overall understanding and to providing a more stable environment for discussions to take place in the Inclusive Framework.

If you would like more detail on the side by side package, please contact Keith Rushen on 0207 486 2378.

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