On 5 January 2026, the OECD announced that 147 members of the Inclusive Framework on BEPS had reached consensus on a new package of administrative guidance under the Pillar Two global minimum tax (the GloBE Rules). The package adds five safe harbours — led by a Side-by-Side safe harbour designed to sit alongside US minimum tax rules — and will be folded into the Commentary to the GloBE Model Rules.
Key takeaways
- The package was agreed on 5 January 2026 by 147 Inclusive Framework members and will be incorporated into the GloBE Model Rules Commentary.
- It follows the US withdrawal of support for Pillar Two, the advance and withdrawal of the proposed Section 899 retaliatory measure, and the June 2025 G7 agreement to pursue a Side-by-Side approach.
- It introduces five safe harbours: Side-by-Side, Ultimate Parent Entity (UPE), a permanent Simplified ETR, a one-year extension of the transitional CbCR safe harbour, and a substance-based tax incentive safe harbour.
- Under the Side-by-Side safe harbour, once elected, top-up tax is deemed zero for both the IIR and the UTPR — but only for MNEs headquartered in eligible jurisdictions.
- Crucially, the reliefs do not affect QDMTT — groups must still pay Qualified Domestic Minimum Top-up Tax wherever it applies, including the UAE.
Why did the 2026 package emerge?
The 2026 package emerged as a political settlement as much as a technical one. It follows the United States' withdrawal of support for Pillar Two a year earlier, the advancement and then withdrawal of the proposed Section 899 retaliatory tax measure, and a June 2025 G7 agreement to pursue a "Side-by-Side" approach that accommodates US minimum tax rules rather than overriding them. The Inclusive Framework's stated objectives are to preserve the core benefits of the global minimum tax while improving certainty, stability and simplicity for in-scope groups.
The five safe harbours at a glance
Each relief targets a different situation. The table below summarises how they compare.
| Safe harbour | Effective period | Key benefit | Scope and limitations |
|---|---|---|---|
| Side-by-Side (SbS) | FYs from 1 Jan 2026 | Deemed zero top-up under IIR/UTPR | MNEs headquartered in eligible jurisdictions; currently only the US qualifies, subject to stocktake |
| UPE safe harbour | FYs from 1 Jan 2026 | Exemption from UTPR on UPE-jurisdiction profits | MNEs with a Qualified UPE Regime; likely limited to the US initially |
| Simplified ETR (SESH) | Generally from FY 2027 | Deemed zero top-up for qualifying jurisdictions | All in-scope MNEs; needs extensive data, close to a full GloBE computation |
| Transitional CbCR | FYs beginning on or before 31 Dec 2027 (not ending after 30 Jun 2029) | Temporary simplification using CbCR data | All in-scope MNEs; transitional only, ETR threshold fixed at 17% |
| Substance-based tax incentive | From adoption of the package | Reduces top-up tax impact of qualifying incentives | All in-scope MNEs; strict caps, only real-activity incentives qualify |
How the Side-by-Side safe harbour works
The Side-by-Side safe harbour offers the broadest relief. Once elected, top-up tax is deemed zero under both the income inclusion rule and the undertaxed profits rule, and the relief reaches across the whole group structure — including stateless and minority-owned entities. Where a jurisdiction adopts the safe harbour after 1 January 2026, it is expected to apply it retrospectively for the full fiscal year.
Eligibility is gated by a "Central Record" of qualifying jurisdictions, which a country joins only by meeting four criteria: a statutory corporate income tax rate of at least 20% after adjustments; a QDMTT or financial-statement-based minimum tax at a nominal rate of at least 15%; a comprehensive worldwide regime taxing foreign branch and controlled-foreign-company income; and a credit for QDMTTs paid elsewhere. In practice, only the United States is expected to qualify at first, subject to a stocktake.
The restrictions that matter most
The restriction that matters most is what the reliefs leave untouched: QDMTT. The Side-by-Side and UPE safe harbours deem top-up tax zero only under the income inclusion rule and the undertaxed profits rule, so a Qualified Domestic Minimum Top-up Tax is still payable in full wherever it applies — a decisive point for groups operating in the Gulf.
A UAE constituent entity's DMTT liability is unchanged, whatever relief the parent claims elsewhere — the safe harbours reach the parent-level IIR and UTPR position, never the domestic top-up tax the Emirates collects.
The UPE safe harbour and the Central Record carry two further limits. The UPE safe harbour only deems top-up tax to be zero for the UPE jurisdiction itself, and only for UTPR purposes. A qualifying jurisdiction must also notify the Inclusive Framework within three months of any material change — such as a corporate tax rate cut or a new incentive — that could jeopardise its qualified status.
Lighter reporting, not lighter substance
Electing the Side-by-Side safe harbour does reduce the data burden in the GloBE Information Return: an electing group is not required to complete the high-level summary in Section 1.4, and certain data points relevant only to IIR and UTPR calculations can be omitted. But the jurisdictional section must still be completed for any territory where a QDMTT applies, so groups cannot switch off their tax automation and reporting processes for the countries that matter to them most. In practice, SBC advises UAE groups to run the parent-level relief and the domestic DMTT as two separate workstreams, because a safe harbour claimed abroad does nothing for the Emirates top-up tax.
Frequently asked questions
What did the OECD agree on 5 January 2026?
147 members of the Inclusive Framework on BEPS reached consensus on a new package of administrative guidance under the Pillar Two GloBE Rules. It introduces five safe harbours — including the Side-by-Side and UPE reliefs — and will be incorporated into the Commentary to the GloBE Model Rules.
Does the Side-by-Side safe harbour remove all Pillar Two tax?
No. It deems top-up tax to be zero under the income inclusion rule and the undertaxed profits rule for eligible groups, but it does not affect QDMTT. Groups must still pay Qualified Domestic Minimum Top-up Tax in every jurisdiction where it applies, including the UAE.
Which jurisdictions qualify for the Side-by-Side safe harbour?
Only jurisdictions on the OECD Central Record, which requires a corporate tax rate of at least 20% after adjustments, a QDMTT or financial-statement minimum tax of at least 15%, a comprehensive worldwide tax system and a credit for foreign QDMTTs. Initially, only the United States is expected to qualify, subject to a stocktake.
How long does the transitional CbCR safe harbour last?
The package extends it by one year. It applies to fiscal years beginning on or before 31 December 2027, provided they do not end after 30 June 2029, and uses a fixed ETR threshold of 17% based on country-by-country reporting data.
How SBC Tax Consulting can help
SBC helps groups read the 2026 package correctly — capturing the parent-level relief that is genuinely available while keeping their UAE and other QDMTT obligations intact. We assess safe-harbour eligibility, model the reporting simplifications, and align your GloBE Information Return with your corporate tax and international tax filings. As OECD guidance keeps moving, our insights track the changes that affect Gulf-based groups. Contact SBC to assess how the new safe harbours apply to your structure.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.