Espen Ommedal
Marianne Brynjulfsen Overaa
Charlotte Heieren
As mentioned in our previous newsletters on the subject matter, the US under President Trump's administration has withdrawn from the OECD's Global Tax Deal and Pillar Two (the 15% global minimum tax).
As a countermeasure against countries that have implemented what the U.S. considers extraterritorial and discriminatory taxes, including Pillar Two, the Trump administration proposed the introduction of a new IRC Section 899 as part of the budget reconciliation Bill, "One Big Beautiful Bill". The proposed Bill by the House of Representatives introduces, amongst others, an increased tax rate of up to 20 percentage points for certain foreign taxpayers with ties to the US. The Senate however modified the proposal to a maximum increase of 15 percentage points and delayed the date when Section 899 were to come into effect.
On June 27, 2025, US Treasury Secretary Scott Bessent announced a groundbreaking agreement with G7 nations that will exempt American companies from the OECD's Pillar Two tax framework. In exchange for this exemption, the US will withdraw Section 899 from the "One Big Beautiful Bill". This development marks a significant shift in the global corporate taxation landscape.
Key principles
The agreement is further outlined in the G7 statement setting out a proposed way forward for the operation of global minimum tax, with a side-by-side arrangement based on the following key principles:
- A side-by-side system would fully exclude U.S. parented groups from the Under Taxed Payment Rule and the Income Inclusion Rule under Pillar Two in respect of both their domestic and foreign profits.
- A side-by-side system would include a commitment to ensure any substantial risks that may be identified with respect to the level playing field, or risks of base erosion and profit shifting, are addressed to preserve the common policy objectives of the side-by-side system.
- Work to deliver a side-by-side system would be undertaken alongside material simplifications being delivered to the overall Pillar Two administration and compliance framework.
- Work to deliver a side-by-side system would be undertaken alongside considering changes to the Pillar Two treatment of substance-based non-refundable tax credits that would ensure greater alignment with the treatment of refundable tax credits.
As this situation develops, it will be intriguing to observe the ripple effects of this agreement and its potential impact on international tax relations and domestic economic policies. We will continue to monitor the development and its potential impact on international tax legislation.
