Emilie Sibi, Senior Manager, International Tax, Forvis Mazars: For the last year, following the White House executive order that warned jurisdictions applying the backstop mechanism to US companies could face retaliation, the future and integrity of the Global Minimum Tax Framework were in question.
Emilie Sibi
The new safe harbours introduced by the agreement signed in January 2026 will be particularly beneficial for groups with ultimate parent entities based in the US. These multinational groups would have been within scope of the backstop mechanism (UTPR – entities based in Pillar 2 jurisdictions collect the top up tax due, if any, by a parent or any other entities based in a jurisdiction which has not adopted Pillar 2) and were facing doubt on the interactions between the US tax rules (GILTI regime) and the Pillar 2 rules.
As a large number of Irish multinationals have US-based parents, the application of UTPR represented a significant challenge (especially in terms of coordination of effort within the group). This new deal, with the introduction of the new safe harbours, simplifies the management of UTPR obligations, both in terms of the computation of top-up tax due and future filings.
The agreement ensures that the domestic top-up tax (QDMTT) continues to apply in jurisdictions, such as Ireland, that have adopted Pillar 2. Therefore, the time and money invested by Irish multinationals to date in preparing for Pillar 2 (through system changes, data gathering, and process design) remain relevant and valuable.
Overall, the Side-by-Side agreement represents a constructive step forward. It provides practical simplifications, reduces tensions between major tax systems, and offers Irish multinationals greater certainty as they move into their first Pillar 2 filings in June next.
Deirdre Barnicle
>: The agreement of the Side-by-Side deal is welcome news for Irish-headquartered multinationals with US subsidiaries, who will no longer be hit by Pillar Two taxes. Essentially, the safe harbour created by the Side-by-Side deal deems the US tax system compliant with Pillar Two and exempts US MNEs from particular ‘top-up’ taxes (on the basis that the US tax regime has similar policy objectives and the same overall impact as the global minimum tax regime). Moreover, Irish-headquartered MNEs with US branches may now be able to benefit from US research and experimentation credit, which previously may have been caught by Pillar Two if it were not for the new safe harbour.
The risk of double-taxation has shrunk significantly for Irish-headquartered MNEs with US subsidiaries; compliance should also become much more straightforward for these groups. On a further positive note, the agreement allows other countries to benefit from the safe harbour once they meet the relevant conditions i.e. that there is an eligible domestic tax system (e.g. a statutory corporate tax rate of at least 20% is applied), an eligible worldwide tax system (e.g. significant unilateral mechanisms are used to prevent BEPS risk), and tax relief is provided for foreign qualified domestic minimum top-up taxes (QDMTTs) on the same terms as other creditable covered taxes.
The Side-by-Side deal also contains simplification measures which should reduce administrative burdens for both MNEs and tax authorities. However, MNEs should be aware of the ongoing GloBE information return reporting obligations and QDMTTs that remain in place despite the safe harbour. Moreover, for Irish-headquartered MNEs with US subsidiaries, FY2024 and FY2025 continue to be governed by the original Pillar Two rules.
This article appeared in the March 2026 edition of the Irish Tax Monitor.
