The OECD released the long-awaited "side-by-side arrangement" today (January 5), following agreement on key elements by the OECD/G20 Inclusive Framework on BEPS. The agreement follows months of negotiations and effectively exempts US multinationals from most BEPS 2.0 Pillar Two global minimum tax rules, in recognition of US minimum tax rules. Under the arrangement, US parented groups will be exempt from the Income Inclusion Rule and the Undertaxed Profits Rule (UTPR). The US exemption from the global minimum tax rules will take effect for fiscal years beginning on or after January 1, 2026. The transitional UTPR safe harbor expired at the end of 2025, and the US government was keen on preventing a gap between the expiration of the safe harbor and implementation of the side-by-side agreement. The agreement also includes a new ETR-based compliance safe harbor and a new safe harbor for certain substance-based tax incentives.

An EY Global Tax Alert is pending. An EY global webcast on the side-by-side agreement will be held on January 12, 2026.

Published by NTD’s Tax Technical Knowledge Services group; Maureen Sanelli, legal editor