The OECD’s Pillar Two rules and the introduction of a global minimum tax rate will affect many multinational businesses operating across borders.
However, after months of negotiations, US-based multinationals will now be exempt from the 15 per cent tax rate and will continue to rely on domestic regimes.
For US-headquartered groups with UK operations, you may be unsure of how this will impact your filing requirements and what you need to do to stay compliant.
What are the Pillar Two obligations?
Pillar Two, often referred to as the Global Anti-Base Erosion (GLoBE) rules, applies to multinational groups with global revenues exceeding €750 million.
It requires companies to calculate effective tax rates for each jurisdiction in which they operate.
If a jurisdiction’s tax rate falls below 15 per cent, a top-up tax may apply.
The UK has signed up to the Pillar Two agreement, with the multinational and domestic top-up tax rules taking effect for accounting periods starting on or after 31 December 2025.
Most OECD countries will enforce Pillar Two rules, but the US system has opted to continue using its domestic regimes.
This includes:
- Global Intangible Low Taxed Income (GILTI) – This calculates a blended minimum tax across all foreign subsidiaries.
- Corporate Alternative Minimum Tax (CAMT) – This applies a 15 per cent minimum tax but is based on financial statements income, not the OECD’s GLoBE framework.
This separation means that US parented groups cannot automatically rely on US compliance to meet their Pillar Two obligations in the UK or other OECD countries.
What is a ‘side by side’ framework?
The US Treasury proposed a ‘side by side’ framework to address this situation and this was officially agreed with the OECD on 5 January 2026.
This will allow US groups to operate under domestic rules while being recognised for certain reporting responsibilities in Pillar Two jurisdiction.
The framework reduces the number of times a multinational group will need to file GLoBE returns.
However, it does not eliminate local obligations, such as filing UK Pillar Two returns or paying top-up tax where applicable.
What are the implications for UK entities?
UK subsidiaries of US-parented groups must carefully assess their obligations.
These may include:
- Filing a UK Overseas Return Notification to HMRC
- Submitting a UK Pillar Two return, which could be nil or include top-up tax
- Monitoring the risks of double taxation if US rules and GLoBE calculations differ
Double compliance obligations will be more difficult to manage and timing differences between US and OECD rules may increase the risk of mismatches.
How can we support you?
Managing two sets of tax obligations can be overwhelming for many international businesses.
US-owned UK businesses should seek financial support to review their UK entities and assess whether they meet the €750m threshold.
Our specialist team can help clarify your Pillar Two filing obligations and model the potential top-up tax and double taxation risks.
With the right financial advice, you can manage your international tax planning and the complexities of operating under dual systems.
For further support or guidance on your international tax planning, contact our team today.