Paraic Burke, Head of Tax, PwC Ireland: In 2025, international tax policy was dominated by US actions that significantly disrupted Pillar Two, the OECD’s Global Minimum Tax initiative. The Executive Orders issued by the new US administration withdrawing support for the Pillar Two framework created considerable uncertainty for jurisdictions. Central to the US stance was its demand that US headquartered groups be exempted from the Pillar Two rules. A key threat arose from the US proposed Section 899 “revenge tax”, should the United States’ demands with respect to Pillar Two not be met. Throughout 2025, concern grew that if the OECD failed to develop a viable solution, that the US might initiate these retaliatory tax measures, potentially causing countries to react in kind, and resulting in a disorderly dismantling of the Pillar Two regime.

The announcement of the G7 agreement in June 2025 to implement a “side-by-side” (“SbS”) agreement was critical in averting US threats, and aimed to preserve Pillar Two’s operational integrity. To implement this agreement, the OECD issued a new package of administrative guidance on 5 January 2026. This guidance formally introduced the SbS “system” as part of a broader set of safe harbours. Under the SBS system, two distinct safe harbours are made available to MNE groups headquartered in jurisdictions that the Inclusive Framework recognises as having an eligible tax regime. Consistent with the G7 agreement, the SbS approach ensures that the US domestic minimum tax regime sits alongside the Pillar Two Global Minimum Tax, with both systems operating in parallel to achieve the agreed minimum tax outcomes. The US is currently the only jurisdiction identified as meeting the eligibility criteria.

Agreement to these safe harbours by the OECD BEPS Inclusive Framework was likely necessary to prevent further fracturing of the regime, as domestic implementation of the Pillar Two Global Minimum Tax slowed rapidly in the latter half of 2025, amid fears of US retaliation to countries if they continued to proceed with implementation of the UTPR and increasing calls from industry groups and politicians for pauses and re-evaluations of the rules.

While other countries may seek to demonstrate they too qualify for the safe harbours, the reality is that only the US has qualified initially, and further qualifications may be contentious.

The January OECD side-by-side package also provides for a future stocktake by 2029 to assess any competitive distortions between companies or jurisdictions. QDMTTs remain unaffected by the overall SbS package and these SbS safe harbours. Large Irish corporate taxpayers will still need to prepare detailed GloBE filings for jurisdictions that have already enacted the GloBE rules in 2024 and 2025. Compliance costs are expected to be significant.

Although a disorderly breakdown of Pillar Two has been avoided for now, the presence of five safe harbours highlights ongoing instability within the framework. It is unlikely this will be the last call for safe harbours and further changes, so stability of the Global Minimum Tax is not guaranteed.

Deirdre Barnicle, Partner, McCann FitzGerald: The events of 2025 cast significant doubt over the future of Pillar Two. In the summer of 2021, 130 countries in the OECD/G20 Inclusive Framework (IF) on BEPS agreed a new framework for the reform of international tax rules; the object of Pillar Two of this plan was to ensure the effective tax rate of entities did not fall below 15%.

However, under a proposed provision (section 899) of the US ‘One Big Beautiful Bill’, retaliatory taxes were threatened against countries who applied ‘unfair’ taxes on US MNEs (i.e. those countries imposing certain Pillar Two rules). Following an agreement made by G7 leaders as the Bill made its way through the Senate, OECD Pillar Two taxes would no longer apply to US companies and as a result, section 899 was dropped. However, the provisional US-G7 deal still needed to be formally adopted by the OECD.

On 5 January 2026, a landmark ‘Side-by-Side’ package was agreed between more than 145 countries which formalises the US MNE exemption. There had been delays reaching the final text of the agreement, but some reluctant European countries lifted their objections once reassurances were received that the agreement would be reviewed regularly to ensure a level playing field. The first review of the Side-by-Side system will take place in 2029, and this will be accompanied by a Commission assessment of the system’s effect on EU competitiveness. Moreover, a review clause allows other countries to access the same exemptions as the US if they have implemented a global minimum tax by 2027. Initial commentary is mixed as to whether this is a strategic success for the OECD or a resounding defeat for the BEPS project. The development is welcome for any Irish MNEs with US subsidiaries, who will no longer be hit by Pillar Two taxes.

On a further positive note, the agreement contains simplification measures which should reduce administrative burdens for both MNEs and tax authorities. Similarly, exemptions now exist to allow countries to offer certain tax incentives to attract MNEs, where the measures are “strongly connected to economic substance”. Views are mixed as to whether an updated Directive would need to be agreed to give effect to the changes in the Side-by-Side package. However, the European Commission was reported to have indicated that such an agreement would not require any amendment to Council Directive 2022/2523 and in its 5 January statement on the matter (in which the Commission welcomed the OECD’s agreement on the package), no mention was made of legislative amendments.

Pillar 1 of the BEPS plan sought to close tax loopholes for Big Tech groups and multinationals. This portion is yet to be enacted, and given the current economic and political climate, many have observed that this is unlikely to change.

For large Irish corporate taxpayers without US income sources who will not benefit from the exemptions, the original Pillar Two registration deadline (for groups with a fiscal year of 1 January to 31 December 2024) was extended from 31 December 2025 to 28 February 2026. This allowed for ROS updates to ensure more complex groups could complete the step-by-step registration process. While the first Pillar Two tax returns and payments are due by 30 June 2026, further Revenue guidance is expected in advance of this deadline e.g. for companies transitioning between MNE groups. Furthermore, close attention should be paid to see what impact the Side-by-Side Package will have on Pillar Two payments in the future. It has been suggested that it is more likely that the Commission will seek to adjust Pillar Two through guidance rather than a formal legislative procedure.

Khatuna Baratashvili, Manager, Financial Services Tax, Forvis Mazars: After years of negotiations, the OECD/G20 Base Erosion and Profit Shifting (BEPS) project has made progress with the “Two-Pillar” solution. This includes Pillar One, which focuses on reallocating taxing rights, and Pillar Two, which establishes a global minimum tax. 2025 marked a significant step in the initiative that has lasted a decade.

The work on Pillar One, which involves Amount A and Amount B, is still ongoing and implementation is not yet complete. By early 2025, the OECD announced that the text for Amount A in the Multilateral Convention was mostly finished and stable. However, it did not open for signing as planned and it failed to secure sufficient support for ratification. The United States withdrew its political support in January 2025, making ratification practically impossible.

Amount B has progressed further. There was a general agreement on a more straightforward transfer pricing approach for basic distribution activities. However, there was no full agreement on pricing details or safe harbour outcomes. As a result, Amount B is optional, has limited scope and is not adopted consistently.

Pillar Two has been implemented in over 60 jurisdictions, with the EU Minimum Tax Directive applied uniformly across Member States. Ireland has fully adopted the Qualified Domestic Top-Up Tax (QDTT), Income Inclusion Rule (IIR) and a registration and penalties regime. The Pillar Two registration platform in Ireland launched in August 2025, with mandatory registration initially due by 31 December 2025, later extended to 28 February 2026. Non-compliance incurs a €10,000 penalty, marking the shift from policy debate to compliance.

In late 2025, the OECD/G7 introduced the “Side-by-Side Package”, which was agreed in January 2026 and negotiated throughout 2025. It included new permanent and transitional safe harbours, formal accommodation of the US minimum tax regime and continued emphasis on QDTTs. This package prevented Pillar Two’s collapse amid US opposition and will be reviewed in 2029 to ensure it meets its global minimum tax objectives.

Irish multinationals with a turnover of €750 million or more must comply with several key requirements: registering and filing the GloBE information return (GIR), the QDTT return and/or IIR returns. These requirements can lead to significant compliance costs and advisory fees.

While Ireland’s headline corporate tax rate of 12.5% remains unchanged for domestic purposes, the introduction of Pillar Two mandates a minimum effective tax rate of 15% for large groups, achieved through top-ups. Initially, this change may increase revenue for the Irish Government; however, over time, Ireland’s attractiveness for foreign direct investment (FDI) could diminish if other elements, such as Pillar One reallocations, reduce the effective tax advantage.

The administrative burden for large Irish businesses increases due to the need for expanded reporting, modelling, and global coordination. In theory, a global minimum tax rate helps mitigate the risk of a “race to the bottom,” and contributes to the stabilisation of global tax norms. However, for a country like Ireland, this situation could lead to less differentiation in attracting FDI based solely on tax incentives.
The OECD has indicated that jurisdictions attracting a disproportionate amount of FDI may initially experience revenue increases from Pillar Two top-ups. However, the long-term impacts will depend on the dynamics of global tax competition. The BEPS initiative is now entering a mature implementation phase, focusing on balancing political compromises, such as side-by-side tax regimes, with practical compliance frameworks. For Irish corporate taxpayers, key themes to monitor in 2026 include managing compliance with Pillar Two, understanding the impact on effective tax rates, and adapting to ongoing global tax reform trends.

This past year - 2025 - has been a watershed year for the OECD’s BEPS project, and some might say even a terminal year. On 5 January 2026 the OECD/G20 Inclusive Framework on BEPS announced that agreement had been reached on a package of measures designed to chart a course forward for the global minimum tax project. Can you briefly summarise the main elements of the agreed package especially those elements designed to address US concerns around the global minimum tax project, any safeguards included and what it might mean for large Irish corporate taxpayers in particular?

Michael Tansley, Tax Director, Walkers (Ireland) LLP: The January 2026 package of measures follows a period of intense negotiations which commenced following agreement being reached at a G7 level in June 2025 that a side-by-side solution could preserve the gains made by jurisdictions in the Inclusive Framework and provide greater stability and certainty in the international tax system going forward. Under the G7 side by side solution US parented groups will be exempt from the Income Inclusion Rule (“IIR”) and the Undertaxed Profits Rule (“UTPR”) in recognition of the existing US minimum tax rules to which they are subject. The package of measures takes the form of Administrative Guidance which is to be incorporated into the Commentary to the GloBE Model Rules and comprises of the below elements:
a) Side-by-Side System to facilitate existing qualifying minimum tax regimes
b) Simplification measures
c) Alignment of substance-based tax incentives

The Side-by-Side System (SbS System) addresses US concerns with respect to the global minimum tax project and will only be available to an MNE Group that has its ultimate parent entity (UPE) located in a jurisdiction which has both an eligible domestic tax regime and an eligible worldwide regime. Where the SbS System safe harbour applies, the top up tax shall be deemed to be zero for the purposes of the IIR and the UTPR. An election for this SbS System safe harbour can be made for fiscal years commencing on or after 1 January 2026 or a later year as listed in the Central Record (the Central Record records all jurisdictions with qualified SbS regimes and currently includes the US only as having such a regime). Additionally, the Inclusive Framework also agreed a safe harbour for jurisdictions with regimes that only meet the domestic part of the eligibility criteria and this UPE safe harbour will provide a safe harbour with respect to domestic profits of MNE Groups headquartered in jurisdictions which have a pre-existing eligible domestic tax regime.

The UPE safe harbour applies for fiscal years commencing on or after 1 January 2026 and effectively replaces the transitional UTPR safe harbour which expired at the end of 2025. It is important to note that all MNE Groups (including those eligible for the SbS System safe harbour or the UPE safe harbour) remain subject to the Qualified Domestic Minimum Top-up Taxes (QDMTT) in all QDMTT jurisdictions in which they operate and in order for a jurisdiction to be considered to have a qualified SbS regime it must, as one of the qualifying conditions, provide a foreign tax credit for QDMTTs on the same terms as any other creditable Covered Tax. In terms of safeguards the SbS System is underpinned by a commitment to ensure that any substantial risks that might be identified are addressed to preserve the common policy objectives and to this end the Inclusive Framework will undertake a stocktake to be agreed and concluded by 2029. The stocktake will also be accompanied by an assessment by the European Commission on the implementation and effects of the SbS System and its impact on EU competitiveness. Action will be taken to address any substantial risks identified.

In addition to the above the package of measures also includes simplification measures in the form of the introduction of a permanent Simplified ETR safe harbour, an extension of the Transitional CbCR safe harbour for one year and a work programme for additional simplifications. Provision is also made for the Substance-based Tax Incentive safe harbour to allow an MNE Group to treat certain qualifying tax incentives as an addition to Covered Taxes so that MNE Groups can benefit from qualifying tax incentives that are strongly connected to economic substance in a jurisdiction.

In practical terms, the SbS System is a solution to accommodate the US which is otherwise not part of the OECD global minimum tax system. The withdrawal of US support undermined the goals and credibility of the OECD global minimum tax project, however the SbS system allows the US minimum tax system to co-exist with the OECD global minimum tax system. The SbS System will naturally be relevant for Ireland where a number of in-scope subsidiaries are part of US-parented groups. MNE Groups should review the OECD package measures to determine their impact (if any). These OECD measures will additionally need to be implemented across the EU and developments in this regard should be kept under review as matters progress throughout 2026. On 12 January 2026 the European Commission published a notice in the Official Journal of the European Union acknowledging the OECD package measures and confirming its application in the context of Council Directive (EU) 2022/2523 (the Pillar Two Directive).

This article appeared in the January 2026 edition of the Irish Tax Monitor.