OECD Pillar Two Side-by-Side Safe Harbor Package: Technical Review And Implications

Highlights

• The Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework (Inclusive Framework) on January 5, 2026, released its Side-by-Side (SbS) Safe Harbor package (SbS Package) to streamline Pillar Two's global minimum tax rules and align them with domestic tax regimes.
• Effective January 1, 2026, this eliminates any top-up tax under the income inclusion rule for U.S.-parented groups that elect the new SbS Safe Harbor, and the undertaxed profits rule is deemed zero for those groups' controlled domestic and foreign operations.
• The SbS Package expands and introduces additional safe harbor elections, as well as revised and expanded treatment of tax incentives. It also preserves the right of a market jurisdiction to impose a qualifying domestic minimum top-up tax and provides for a "stocktake" by (most likely) 2029 to assess any distortionary effects and encourage additional countries to qualify. The stocktake will also consider