Cross-border Tax Talks

Pillar Two: The Side-by-Side Package

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Beth Bell, a Principal in PwC’s Washington National Tax Services Policy Office. She previously served as a Senior Advisor to the US Treasury Department, Tax Counsel for the US House Committee on Ways and Means, and Policy Director and Tax Counsel in the United States Senate. Doug and Beth discuss the OECD’s January 2026 side‑by‑side package: why consensus formed, how the side‑by‑side and UPE safe harbors operate, and why QDMTTs are taking center stage. They cover the simplified ETR safe harbor, the one‑year extension of the transitional CbCR safe harbor, elections and 2024–2025 compliance, enacted‑law accounting effects, the key footnote on UTPR allocation, and the new qualified tax incentives safe harbor, including both expenditure-based and production‑based credits, plus implications for inbound investment and the 2029 stocktake. 

• [00:07] Opening and sponsor message; PwC’s Pillar Two engine and uest introduction 
• [01:48] From expectations to reality; OECD side‑by‑side package; what’s included 
• [04:04] How consensus formed amid late objections (Poland, Estonia, Hungary, China) 
• [05:23] Why the “door left open” matters for medium‑term stability; admin cost concerns; unanimity dynamics; China as late wildcard 
• [07:05] Substance‑based incentives broadened (including super deductions); domestic‑politics lens; join procedures; non‑implementers; complexity noted 
• [09:37] Congressional reaction: majority leadership welcomes result; focus on implementation; Section 899 referenced 
• [10:58] Non‑self‑executing nature of guidance; enactment required; “ambulatory” approach rare 
• [12:15] Accounting: enacted‑law focus under IFRS/GAAP; quarter‑close 
• [13:28] Footnote 3: UTPR allocation proportionate across jurisdictions, not all to one 
• [14:43] Big‑picture takeaways: scale of negotiation; US objectives; inbound compromise 
• [17:20] QDMTTs emphasized; stocktake and future workstreams signaled 
• [19:10] Competitiveness and market behavior; inversions context; 2029 stocktake questions; consensus controls output; political durability 
• [24:18] What safe harbors don’t do: QDMTTs still apply; 2024–2025 compliance 
• [25:56] Simplified ETR safe harbor: streamlining expectations 
• [28:49] Side‑by‑side eligibility: domestic 20% CIT + financial‑statement minimum tax at 15% 
• [30:26] Worldwide tax regime: broad base + BEPS‑oriented measures; UPE safe harbor vs side‑by‑side; pre‑existing regimes 
• [34:08] QDMTTs unaffected; Election under Section 1 of GloBE Information Return; 2024–2025 reporting unchanged; Qualified Tax Incentives; GMT 
• [40:14] Expenditures-based and Production‑based incentives 
• [42:21] Substance caps: 5.5% of payroll or depreciation; alternative 1% carrying value of eligible tangible assets 
• [44:02] Inbound US investment effects; related‑benefits guardrails 
• [46:44] Transitional CbCR safe harbor extended; years beginning on/after 12/31/2027; 17% rate 
• [47:29] Urgent actions: begin 2024 Pillar Two compliance, assess enacted‑law impacts, monitor legislation; utilize PwC’s Pillar Two Country tracker. 

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