OECD Pillar Two Side-by-Side Package: New Safe Harbours for 2026 Planning

Executive Overview

In January 2026 the OECD/G20 Inclusive Framework agreed a Side-by-Side package for the global minimum tax. The package introduces a Simplified ETR Safe Harbour, extends the Transitional CbCR Safe Harbour by one year and creates a Substance-Based Tax Incentives Safe Harbour for certain qualifying incentives. Taken together, these measures can materially reduce the compliance burden for groups that qualify.

The important word is qualify. Each safe harbour is a rule with conditions attached, not a general exemption, and eligibility must be established for each jurisdiction and each year. Groups that carry forward last year's conclusions without retesting them risk relying on a simplification they are no longer entitled to use.

Regulatory Background

Alongside the new and extended safe harbours, the package introduces mechanisms for multinational groups headquartered in jurisdictions recognised as having eligible minimum-tax regimes, while preserving the role of Qualified Domestic Minimum Top-up Taxes. The OECD subsequently incorporated the 2026 administrative guidance into its consolidated Pillar Two commentary, so that the operative rules and their interpretation are read together.

For practical purposes this creates a layered system: a jurisdiction may be covered by a domestic minimum tax, the group may be subject to headquarters-level rules, and a safe harbour may or may not remove the need for a full computation in a given year. Determining which layer governs a particular jurisdiction is now a distinct analytical step, and one that has to be documented in the same way as the computation it replaces.

Why It Matters

The Side-by-Side package changes the sequence of work rather than the objective. Establishing eligibility early can remove entire workstreams; establishing it late, or incorrectly, produces duplicated effort and an unsupported filing position.

• Multinational groups within the scope of Pillar Two, for which the choice between a safe harbour and a full computation determines the cost of the reporting cycle.
• Swiss entities in foreign-headquartered groups, whose local position depends on decisions taken at group level and on the regime applying in the headquarters jurisdiction.
• Groups benefiting from tax incentives, which need to assess whether those incentives fall within the substance-based safe harbour or must be measured in a full calculation.
• Investors and shareholders assessing after-tax returns, where safe-harbour eligibility affects both the effective tax burden and the predictability of results.
• Family offices and holding structures with controlling interests in in-scope groups, where minimum-tax outcomes flow through to distributions.
• Finance teams responsible for CbCR data, whose quality now determines whether the Transitional CbCR Safe Harbour is available at all.

Practical Issues to Review

1. 01Test safe-harbour eligibility jurisdiction by jurisdiction and year by year, and record the test performed rather than only the outcome.
2. 02Assess the quality and consistency of CbCR data, since the Transitional CbCR Safe Harbour depends on data that was often prepared for a different purpose.
3. 03Review entity classification and the allocation of entities to jurisdictions, which can change the jurisdictional result and therefore the eligibility conclusion.
4. 04Identify tax incentives applied within the group and analyse whether they fall within the Substance-Based Tax Incentives Safe Harbour on the terms set out in the package.
5. 05Map the interaction between the headquarters jurisdiction's regime and local minimum taxes, so that the same profit is not left unallocated or double-counted.
6. 06Sequence the compliance calendar so that eligibility is determined before full-calculation work is commissioned, not in parallel with it.
7. 07Retain contemporaneous documentation of the eligibility analysis, its data sources and internal approval, in a form that can be produced on request.

TCC View

TCC's view is that for 2026 planning the first question should be whether a group qualifies for a simplification, and only after that should teams invest in full-calculation workstreams. Reversing that order is the most common and most expensive mistake we see, because a full computation performed for a jurisdiction covered by a safe harbour consumes resources without changing the result.

At the same time, a safe harbour should never be treated as an assumption. It is a conditional rule, and the conditions are tested against data that many groups have not previously used for tax-determinative purposes. We would therefore treat the eligibility file with the same rigour as a computation file: identified data sources, a written analysis, and an internal sign-off that can be explained to an auditor or an authority.

Planning Note

Because the OECD guidance continues to develop and is now consolidated in the Pillar Two commentary, eligibility conclusions should be revisited each year rather than rolled forward. Groups should monitor how the jurisdictions relevant to them recognise the new safe harbours in domestic law, since a measure agreed at Inclusive Framework level takes effect through national implementation. Before acting on a simplification, confirm that the relevant jurisdiction has given it effect for the year in question and that the group's data supports the eligibility test in that year.