This lesson explores the practical implementation of the Pillar Two rules, including the central record of qualified legislation, the new Side-by-Side package agreed in January 2026, and the evolving landscape of the Two-Pillar Solution.

• The Central Record of Qualified Legislation: In January 2025, the OECD released a central record of jurisdictions with Qualified Income Inclusion Rules and QDMTTs qualifying for the QDMTT Safe Harbour. As of January 2025, the list included 27 jurisdictions with qualified IIRs and 28 jurisdictions with QDMTTs. This transitional qualification mechanism relies on self-certification and will remain in effect until a full legislative review has been performed through peer review, expected within two years of the effective date.

• The Side-by-Side Package (January 2026): On 5 January 2026, the OECD/G20 Inclusive Framework agreed a “Side-by-Side package” to support the coordinated operation of global minimum tax arrangements. The package introduces two elective safe harbours for groups headquartered in eligible jurisdictions, designed to reduce duplicative compliance and mitigate double minimum taxation where the headquarter jurisdiction meets defined minimum taxation standards.

• The SbS Safe Harbour: Available only where the Ultimate Parent Entity is located in a jurisdiction with a “Qualified SbS Regime” listed on the OECD Central Record. The effect is that for IIR and UTPR purposes, Top-up Tax is deemed to be zero for the group’s constituent entities. The United States is currently the only jurisdiction that the Inclusive Framework has determined as having a qualified side-by-side regime.

• The UPE Safe Harbour: A separate elective safe harbour for groups headquartered in jurisdictions that meet the domestic eligibility criteria but do not meet the full SbS criteria. The effect is that for UTPR purposes, Top-up Tax for the UPE jurisdiction is deemed to be zero for constituent entities located in that jurisdiction. This applies from 1 January 2026 and effectively replaces the Transitional UTPR Safe Harbour.

• Substance-Based Tax Incentives (SBTI) Safe Harbour: This safe harbour enables MNE Groups to continue benefiting from tax incentives that are closely linked to real economic activity in a jurisdiction. It allows Qualified Tax Incentives to be added to a Constituent Entity’s Covered Taxes, subject to limits designed to preserve the integrity of the global minimum tax. The amount that can be treated as a QTI is capped based on local substance: the cap equals the greater of 5.5% of payroll or 5.5% of depreciation on tangible assets.