Global minimum tax: US-parented groups exempt from IIR and UTPR from 2026

Country reference

• Country: United States (planned expansion country)
• Authorities: Internal Revenue Service (IRS); US Department of the Treasury; OECD
• Topic: OECD Pillar Two side-by-side arrangement
• Key date: Released 5 January 2026; fiscal years from 1 January 2026
• Law: OECD/G20 Inclusive Framework agreement; US minimum tax rules

What was agreed

The OECD/G20 Inclusive Framework agreed a side-by-side arrangement that recognises US minimum tax rules. US-parented groups are exempt from the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) for fiscal years beginning on or after 1 January 2026. The transitional UTPR safe harbour expired at the end of 2025, so the timing avoids a gap.

Also in the package

• A new safe harbour based on effective tax rates, to simplify compliance.
• A substance-based safe harbour for certain tax incentives.
• In September 2026 the Inclusive Framework added a further package: a framework for reviewing domestic legislation, updates to the GloBE Information Return and new guidance.

What it does not change

• Countries can still apply their own qualified domestic minimum top-up taxes (QDMTTs) to low-taxed local subsidiaries of US groups, as most commentators read the arrangement. Check the OECD text for each case.
• Non-US groups remain fully within Pillar Two, including the UTPR.
• US groups still face the US regime: GILTI (now net CFC tested income) and the corporate alternative minimum tax.

Who is affected

• US multinationals with subsidiaries in low-tax jurisdictions, including the UAE and Hong Kong.
• Gulf and Asian groups with US subsidiaries: they remain in scope, so nothing changes for them.
• Joint ventures with US partners: ownership chains decide which rules apply.

What to do now

• US-parented groups: confirm which local minimum taxes still apply in each country.
• Non-US groups: keep Pillar Two compliance on track; the exemption is not reciprocal.
• Watch for country-by-country adoption of the safe harbours.

Our take

The arrangement splits the world in two: US groups under US rules, everyone else under Pillar Two. Local top-up taxes in places like the UAE still matter for US subsidiaries there.