Fonte: ITR

Experts from different jurisdictions have offered their perspectives on the pillar two side-by-side agreement announced last week, with one claiming multinationals were “breathing a sigh of relief”.

The OECD announced the landmark deal on January 5, following months of negotiations and after US Treasury secretary Scott Bessent announced last year that pillar two taxes would not apply to US companies.

The controversial plan, which had been criticised by various countries, will see US-parented groups exempted from pillar two’s income inclusion rule (IIR) and undertaxed profits rule (UTPR).

The US had been seeking to reach an agreement on a side-by-side pillar two deal with the OECD since June last year.

Aruna Kalyanam, a US-based global tax policy leader at EY, says multinational companies the world over were “breathing a sigh of relief” with the latest announcement.

“Six months of intense negotiations by the Inclusive Framework has added certainty to the international tax system, substantially simplified reporting requirements, and tabled the threat of retaliatory tax measures,” she says.

She also tells ITR that companies are sure to welcome the agreement’s reduction of unnecessary administrative burdens and clarity on treatment of tax incentives for research and other investments.

Safe harbour simplification

Kalyanam labels the simplified effective tax rate (ETR) safe harbour and the new substance-based tax incentive harbour as “key elements” of the agreement.

These changes have been sought by companies around the world, she tells ITR. The side-by-side safe harbour system permits MNEs headquartered in qualifying jurisdictions to apply a top-up tax of zero under the IIR or UTPR across their global operations.

Meanwhile, the substance-based tax incentives safe harbour allows for defined qualifying tax incentives to be added to covered taxes or simplified covered taxes where the permanent simplified ETR safe harbour also applies.

Joran Gill, an international tax director for Alvarez & Marsal based in the UAE, tells ITR the side-by- side safe harbour guidance has come in response to the US’s withdrawal of support for pillar two.

It was also in response to concern raised from the planned US implementation of Section 899 as a retaliatory measure to the broader global application of pillar two, according to Gill.

Section 899 – a measure described by some as a “revenge tax” – would have imposed retaliatory taxes on countries that implemented aspects of pillar two and other foreign taxes deemed unfair by the US.

Pie Geelen, a principal at DLA Piper based in New York, tells ITR the new permanent safe harbour builds on prior OECD guidance and shifts away from country-by-country reporting as the computational basis.

Instead, it relies on consolidated financial statement data with simplified GloBE adjustments to determine a simplified jurisdictional ETR safe harbour which would be applicable as of 2027, and in some cases as early as 2026, he explains.

News of the deal is very welcome relief, especially for US multinationals with operations in non-low-tax jurisdictions, says Travis Ward, a US-based partner and international tax consulting leader at Crowe.

Having a simplified ETR safe harbour where data can be pulled directly from already available financial statements is preferable to undertaking complex GloBe calculations which can skew ETRs, he suggests.

“The simplified safe harbour should reduce the need to build out parallel GloBE data sets in favour of the US Generally Accepted Accounting Principles (GAAP) centralised data that is already more or less at their fingertips,” he says.

Allan Fallet, a tax partner at law firm Duarte Garcia, Serra Netto e Terra in São Paulo, tells ITR the agreement’s reaffirmation that QDMTTs remain a primary mechanism to protect local tax bases affects Brazil and other capital-importing jurisdictions.

Fallet adds that from a business lens the simplifications and safe harbours within the deal are a “mixed blessing”.

They can materially reduce compliance in ‘low-risk’ jurisdictions, but they also create new eligibility conditions and data or reporting considerations that sophisticated groups will need to model carefully, he tells ITR.

Fallet expects boards and tax teams to focus on mapping where pillar two exposure is real rather than theoretical, as well as stress-testing incentive regimes and substance footprints under new substance-based incentive safe harbour logic.

He also expects them to prepare for a compliance environment where transparency and consistency across jurisdictions are as important as the headline tax rate.

US impact

Ward of Crowe also tells ITR he expects the substance-based tax incentive (SBTI) safe harbour to be “extremely helpful”.

This, according to Ward, is because so many US MNEs rely heavily on R&D regimes and manufacturing regimes in Europe, Asia, and Latin America.

“Preserving the value of these incentives is a win,” he says.

The guidance doesn’t go as far as many US MNEs were hoping where the fundamental mismatch of the US system and pillar two could be completely wiped out, Ward adds.

“But it does offer very welcome practical guidance that should meaningfully reduce the compliance and operational burdens for US MNEs as well as their overall risk profile related to global pillar two implications, he notes.

Cory Perry, a partner in Grant Thornton's Washington national tax office in the US, tells ITR the side-by-side agreement is a significant development and a “real win” for US-based multinationals.

“Until now, the fate of the overall pillar two system, and what it would mean in practice for US multinationals, was uncertain at best,” he adds.

However, Perry also points out that the deal does not eliminate pillar two compliance for US multinationals.

The guidance confirms that qualified domestic minimum top-up taxes (QDMTTs) continue to apply, and GloBE information return reporting will still be required, he says.

Perry adds that the reporting should be meaningfully simplified because the sections that relate to IIR and UTPR mechanics will be significantly pared back once the side-by-side safe harbour is effective.

After months of speculation, the question now is not if, but when, the US carveout will begin.