Global minimum tax deal exempts US groups: what it means for smaller companies

Today, January 5, 2026, the 147 countries and jurisdictions in the OECD/G20 Inclusive Framework agreed what they call a side by side package for the global minimum tax. The Inclusive Framework is the group, coordinated by the OECD in Paris, that negotiates international corporate tax rules. The headline is that large groups headquartered in the United States will be exempt from two of the main enforcement tools of the global minimum tax.

OECD Secretary General Mathias Cormann called it a landmark decision in international tax cooperation. US Treasury Secretary Scott Bessent described it as a historic victory for US sovereignty.

Pillar Two in plain words

Pillar Two is the name for the global minimum tax agreed in 2021. It applies only to groups with consolidated revenue of EUR 750 million or more, and it aims to make sure each of those groups pays an effective rate of at least 15% in every country where it operates. If a group pays less somewhere, a top up tax makes up the difference. There are three ways that top up can be collected:

• A qualified domestic minimum top up tax, or QDMTT. The low tax country collects the top up itself. The UAE and Hong Kong have both introduced one.
• The income inclusion rule, or IIR. The country where the group's parent company sits collects the top up on its low taxed subsidiaries abroad.
• The undertaxed profits rule, or UTPR. A backstop that lets other countries where the group operates collect any top up still left over.

What the side by side package does

The United States has its own minimum tax rules for its multinationals and has not adopted Pillar Two. In June 2025 the G7 agreed in principle that US parented groups should be fully excluded from the IIR and UTPR, in return for the United States dropping section 899, a proposed retaliatory tax aimed at countries applying those rules. Today's package turns that understanding into an agreed framework for all members.

• A side by side safe harbour. Groups whose parent is in a country with a qualifying minimum tax system can be exempted from the IIR and UTPR. US parented groups benefit, for fiscal years starting on or after January 1, 2026.
• Domestic top up taxes remain. The package states that QDMTTs remain a primary mechanism for protecting local tax bases. A US group's subsidiary in a country with its own domestic top up tax can still be charged it.
• Simplification. New measures, including a simpler effective tax rate safe harbour, aim to reduce compliance work for groups and tax authorities.
• Tax incentives. A new safe harbour for substance based tax incentives, meaning credits tied to real spending or activity in a country, softens how such incentives count against the 15% minimum.
• A stocktake. Members will review how the system works to keep a level playing field.

Why most of our clients are unaffected

None of this applies to a company or group with revenue below EUR 750 million. A founder with a US LLC, a UAE free zone company, a Hong Kong private limited company, an Estonian OÜ or a BVI holding company is almost always far below that line. Their tax is set by each country's ordinary corporate tax rules, as it was before Pillar Two and as it is after today's agreement.

Why it matters for the UAE and Hong Kong

The package matters for smaller businesses indirectly, because it shapes how low tax jurisdictions protect their revenue and their reputation. The UAE introduced a domestic minimum top up tax from January 1, 2025, alongside its 9% corporate tax. Hong Kong, which taxes only profits sourced in Hong Kong at rates of 8.25% and 16.5%, brought in its own minimum top up tax and an income inclusion rule with effect from the same date, and put the UTPR on hold.

Because domestic top up taxes survive the side by side deal, both jurisdictions can still collect up to 15% from the local operations of large groups, including US ones. That keeps their low ordinary rates available to everyone else while giving them a share of the minimum tax that might otherwise go abroad. The new treatment of substance based incentives also matters for places such as the UAE that have been designing credits for research and high value jobs.

What it means for our clients

For holders of the structures we set up, the practical position is unchanged: small and mid sized companies pay the ordinary local rate, and the global minimum tax is not part of their compliance. The broader lesson is that the international rules are being negotiated and adjusted country by country, so a structure should be chosen for real business reasons and reviewed from time to time.

We help clients form and maintain companies in the UAE, Hong Kong, the United States, the UK, Estonia, Panama, Paraguay, Georgia, Nevis and the BVI, working with our local teams of licensed tax advisers.

This article is general information, not legal, tax or investment advice.