OECD Releases New Pillar Two Administrative Guidance

What happened?

On 5 January 2026, the OECD announced that 147 members of the Inclusive Framework (IF) on BEPS have agreed to a new package of administrative guidance under the Pillar Two global minimum tax rules (the ‘GloBE rules’). The agreed ‘Side-by-Side Package’ (the Package) includes: a permanent simplified Effective Tax Rate (ETR) safe harbour; a one-year extension of the transitional Country-by-Country reporting (CbCR) safe harbour; a substance-based tax incentive safe harbour; a Side-by-Side (SbS) safe harbour and an Ultimate Parent Entity (UPE) safe harbour for eligible countries, and a commitment to conduct future stocktakes of the SbS and UPE safe harbours.

Why is it relevant?

The release of the Package is noteworthy for two main reasons. The first is that the Package offers what was agreed between the G7 members last June, which should prevent the return of the US proposed Section 899. The second point is the unfortunately mixed results on simplification efforts. There is a welcome extension to the temporary CbCR safe harbour for one year. This should reduce the compliance burden for many groups (but only for one additional year). The new simplified ETR safe harbour, however, will require a lot of time and effort to determine if it can be applied. Conscious of this, perhaps, the OECD commits to a (very high level) work programme of more simplification efforts later this year.

Key actions businesses can take today

MNE Groups should review the Package to understand which aspects they can or must apply, in which jurisdictions, and what the safe harbours mean for compliance burden mitigation. MNEs should note that the release does not impact domestic compliance requirements, including registrations, and file and pay deadlines, which still need to be met.