Insight
Pillar II: Global Minimum Tax
July 2026
Global developments, US tensions and the road for 2026.
The year 2025 marked a turning point in the implementation of Pillar Two, the central component of the OECD/G20 Base Erosion and Profit Shifting (BEPS 2.0) project designed to ensure that large multinational enterprise groups pay a minimum effective tax rate of 15% in each jurisdiction where they operate. For businesses, this represents a fundamental shift in how global tax is calculated, managed and forecast. After several years of negotiations and model rules, 2025 was the year in which the global minimum tax framework moved decisively from design to practice. By the end of the year, the key question for governments, tax authorities and businesses was no longer whether Pillar Two would happen, but how to make it work in a technically robust and operationally sustainable way.
In this article we intend to look back at the main developments of 2025 regarding the Global Minimum Tax, focusing on global implementation trends, the political tensions around Section 899 and the "side-by-side" proposal, together with some practical considerations that multinational groups should take into 2026.
A global snapshot at the end of 2025
During 2025, Pillar Two clearly established itself as a central reference point for international corporate taxation. By December 2025, more than 55 jurisdictions had legislation in force and approximately 10 further territories had legislation in progress (including cases benefiting from a six-year extension). However, at the same time, approximately another 60 territories had not yet made a public announcement. In any case, many of these jurisdictions had signalled their intention to implement the Global Anti-Base Erosion (GloBE) rules, reinforcing the perception that Pillar Two is becoming the default framework for large multinational groups.
Throughout 2025, the OECD/G20 Inclusive Framework continued to refine the architecture of the global minimum tax. Additional Administrative Guidance and an updated template for the GloBE Information Return clarified key issues around deferred taxes, tax credits, transitional rules and the interaction between domestic and GloBE-based minimum taxes. In parallel, the work done on multilateral competent authority agreements and technical specifications prepared the ground for a broader exchange of Pillar Two information from 2026 onwards.
None of this removed the complexity of the rules, but it did give taxpayers and administrations a clearer sense of how the system is expected to operate in practice.
US policy shifts, Section 899 and the "side-by-side" compromise
Within this global picture, developments in the United States played a disproportionate role in shaping expectations around Pillar Two. Early in 2025, the Trump administration backed a proposal for new Section 899 of the Internal Revenue Code, widely described as a "revenge tax". The proposed measure would have imposed higher US taxes on certain non-US companies and individuals where their home jurisdictions levied what the US considered "unfair foreign taxes" on US taxpayers, including Pillar Two-style top-up taxes. For observers, this was a clear signal that the US government was prepared to retaliate against other countries' use of the UTPR and similar tools.
The tone shifted in late June 2025, when the G7 countries announced that they had reached a political understanding on a path forward for the global minimum tax. As part of that understanding, the US agreed to abandon the proposed Section 899, while the other G7 members signalled support for a solution under which certain US multinationals would not be fully subject to Pillar Two top-up taxes in other jurisdictions, subject to conditions. The cornerstone of this compromise was the exploration of a "side-by-side" system, under which US-headquartered groups would, in broad terms, be able to rely on the interaction of existing US minimum tax rules and the GloBE framework, rather than being fully exposed to the standard Income Inclusion Rule and UTPR in other countries.
Supporters argued that this approach offered a pragmatic way to bring the US more fully into the Pillar Two architecture without redesigning domestic legislation. Critics, however, warned that it risked creating a de facto carve-out for US-headed multinationals and could undermine the level playing field that Pillar Two was meant to establish. By the end of 2025 and into early 2026, these concerns had intensified: more than two dozen countries raised objections in OECD discussions, and China together with several European jurisdictions openly criticised the side-by-side mechanism as granting undue preferences to US entities and constraining their own tax sovereignty.
In our view, this debate is likely to shape the politics of Pillar Two well beyond 2026.
Regional implementation and practical experience
Outside the US debate, 2025 showed that implementation progressed at different speeds across regions. In the European Union it was the first full year of coordinated application following the 2022 EU Directive, with most Member States having enacted local legislation and taxpayers gaining first-hand experience of filing and compliance.
In Asia–Pacific and the Latin Americas, a small group of early adopters moved ahead, while many other countries remained in the assessment or legislative phase, closely watching how pioneers were handling the transition.
In Africa and the Middle East, adoption was gradual but strategically important. Many jurisdictions prioritised administrative capacity and digital infrastructure before rolling out complex GloBE-style rules, often in parallel with broader tax modernisation agendas. For groups operating in these regions, 2025 was a year of monitoring and scenario planning, rather than immediate implementation.
Technical lessons from 2025 and implications for 2026
Looking back, one of the clearest lessons of 2025 is that Pillar Two is technically demanding in practice. Calculating the GloBE effective tax rate requires groups to harmonise financial and tax data across jurisdictions, adjust for covered and deferred taxes, and navigate detailed rules around excluded entities, losses and tax credits. For many groups, this meant that data quality, system integrity and accounting consistency moved from being "nice to have" to being central elements of tax governance.
The interaction between domestic incentives and the global minimum tax also came into sharper focus, as countries redesigned tax incentives or reviewed preferential regimes to understand whether they undermined the minimum tax or simply shifted where the top-up tax would be collected. From a business perspective, this raised questions not only about the effective tax rate but also about the stability and predictability of incentive regimes over time.
Regulatory coordination remained a further challenge. Despite ongoing efforts by the OECD and the Inclusive Framework to provide clarifying guidance, differences persisted between jurisdictions in areas such as definitions, filing requirements and timelines, increasing the risk of inconsistent outcomes or even double taxation in some fact patterns. At the same time, concerns about administrative burden became more concrete, especially in countries with limited capacity and in groups that operate across a large number of jurisdictions.
For multinational groups, therefore, 2025 was less about theoretical policy discussions and more about implementation. Many organisations undertook mapping exercises to identify which entities fall within the scope of the GloBE rules and which jurisdictions have implemented or announced Pillar Two legislation, and began adapting systems and processes accordingly.
For us, the conclusion is clear: 2025 was the year in which Pillar Two became a practical reality, but also the year in which fault lines appeared around the conditions under which that reality will operate. The political debate around the US "side-by-side" approach, together with the criticism it has attracted from China and several European jurisdictions, suggests that the governance of the global minimum tax will remain a live issue. The coming years will determine how efficiently the system can be managed and whether it ultimately delivers on its objectives of greater fairness, stability and transparency in the international tax system.
About the authors
Airam González
Madrid, Spain
Airam co-leads the Transfer Pricing & Value Chain Analysis practice at Russell Bedford GNL, bringing over a decade of experience in global transfer pricing. He has managed documentation projects across 30+ jurisdictions and has broad expertise in transfer pricing policy design, restructuring, M&A, and cross-border tax authority negotiations including APAs and MAPs.
agonzalez@gnlrussellbedford.es
Gino Ramirez
Madrid, Spain
Gino joined Russell Bedford GNL in 2025 with over ten years of transfer pricing experience. He specialises in global documentation coordination, policy design for intra-group transactions and business restructurings, and has extensive experience valuing complex related-party transactions including share transfers and intangible asset sales.
Mariajosé Díez
Madrid, Spain
Mariajosé joined Russell Bedford GNL in 2025 with around nine years of transfer pricing experience across Europe and Latin America. She specialises in preparing and coordinating documentation for national and multinational groups, with particular expertise in policy design for intra-group services, loans, and the licensing of intangibles.