OECD Publishes Side-by Side Safe Harbor Arrangement Guidance

On January 5, 2026, the OECD released Administrative Guidance on the Side-by Side (SbS) System as part of an update of Administrative Guidance on the Global Anti-Base Erosion (GloBE) Model Rules (Pillar Two). The SbS System introduces two new Pillar Two safe harbors:

(i) the Side-by-Side Safe Harbor (SbS SH) for multinational enterprise groups located in jurisdictions with both eligible domestic and worldwide tax systems;

(ii) the Ultimate Parent Entity Safe Harbor (UPE SH) for MNE Groups with an ultimate parent entity located in a jurisdiction that has an eligible domestic tax system but not an eligible worldwide tax system.

A jurisdiction can qualify as having a Qualified SbS Regime if it has an eligible domestic tax system (a statutory nominal corporate income tax (CIT) rate of at least 20% after taking into account any preferential adjustments and sub-national CIT), maintains this eligible worldwide tax system, provides a foreign tax credit for Qualified Domestic Minimum Top-Up Taxes on the same terms as any other creditable covered tax, and has enacted its eligible domestic and worldwide tax systems prior to  January 1, 2026.

So far, the United States has been entered to the Central Record for Purposes of the Global Minimum Tax as an only eligible jurisdiction for the SbS SH since January 1, 2026. More SbS SH jurisdictions may be added in the future.

For a tax regime to be a Qualified UPE Regime, it must meet the 20% statutory CIT threshold, as well as a Qualified Domestic Minimum Top-Up Tax or an alternate minimum tax based on financial accounting income at a rate not less than 15%, and it must present no material risk for covered MNE groups of sustaining an effective tax rate below 15% on their domestic operations.

On January 12, the European Commission published a notice in which it confirms application of the SbS Package in the context of the European Council’s Pillar Two Directive.

Global Anti-Base Erosion Model Rules (Pillar Two), Side-by-Side Package