The OECD proposes new permanent safe harbours with the aim of simplifying the standard calculation rules of the Global Complementary Minimum Tax (Pillar 2) and reducing the possibility of an obligation to pay tax on this tax. In addition, it proposes the extension of the existing transitional CbCR safe harbour for one year.
On 5 January 2026, the OECD published the document called “side-by-side package”, which contains very relevant new features in the Pillar 2 calculation rules. Just a week later, the European Commission incorporated these amendments into Directive (EU) 2022/2523 regulating the tax (transposed to Spain by Law 7/2024, discussed in our December 2024 post). The new rules seek to simplify the tax by introducing different alternative safe harbors to the standard calculation rules.
Firstly, the extension of the transitional CbCR safe harbour, which was initially scheduled to last for the years 2024, 2025 and 2026 and which is now extended until 2027, is noteworthy. For its Simplified Effective Rate test, the minimum rate that will be required to avoid standard calculations and the payment of any Top-up-Tax is 17%, like that of 2026.
On the other hand, new permanent safe harbours are introduced, which are summarized below.
Simplified effective rate safe harbour (SETR)
As a general rule, this safe harbour will be applicable in financial years starting from 31 December 2026, although it may be applied from 31 December 2025 in jurisdictions that have approved a Safe Harbour – Qualified Domestic Minimum Tax (Safe Harbour QDMTT), subject to minimum additional conditions (which will probably happen in EU Member States, for example).
This safe harbour offers an alternative calculation methodology to the standard tax rules through data obtained from the financial statements used for the preparation of the consolidated financial statements of the ultimate parent entity (as an exception, the source may be local accounting, when the jurisdiction requires the use of local accounting to calculate the QDMTT).
Calculations will be made at the aggregate level by jurisdiction (or, in certain situations, separately for joint ventures), without the need for additional calculations in the constituent entities. This is one of the main simplifications that this safe harbour brings.
Compliance with the safe harbour will prevent any top-up-tax or the need to perform standard calculations if (i) the ratio of simplified covered taxes to the simplified income is equal to or greater than 15%; or (ii) a jurisdiction has simplified losses.
The simplified covered taxes, the simplified income and the simplified losses will be those that are extracted from the accounting with a series of adjustments. Although this safe harbour is presented as a simplification of the tax, these adjustments are still highly technically complex, mainly as regards the calculation of simplified covered taxes.
Adjustments are classified according to whether they are applicable to all groups (basic adjustments), only to some sectors (industry adjustments) or only under certain circumstances (conditional adjustments). Moreover, some of the adjustments are voluntary.
As a novel and positive development, the calculations will take into account the new treatment of substance-based tax incentives, referred to below.
Finally, entry and re-entry rules are foreseen, so that this safe harbour can be applied in a jurisdiction if in years ended in the previous 24 months no Top-up-Tax has been paid in that jurisdiction. On the contrary, if in one year a Top-up-Tax has arisen, in the immediately following year this safe harbour cannot be applied.
Substance-Based Tax Incentives (QTIs)
This safe harbour will be applicable for financial years beginning on or after 1 January 2026.
It covers two types of tax incentives: (i) expenditure-based tax incentives (e.g., R+D); and (ii) production-based tax incentives (e.g., incentives for units produced or for emission reductions).
Through this safe harbour, the covered taxes are increased by the amount applied (i.e. it corrects the negative effect of reducing the effective rate that, in general, tax credits have for the purposes of Pillar 2). This increase will be limited to 5.5% of personnel costs plus the depreciation expenses of tangible assets corresponding to the incentivized activities. Optionally, however, and for a period of 5 years, a limit of 1% of the carrying amount of the jurisdiction’s tangible assets (excluding land and other non-depreciable assets) may be chosen.
Side-by-side system
This safe harbour aims to eliminate the effect of the income inclusion rule (IIR) and the undertaxed profits rule (UTPR) for groups whose ultimate parent entity resides in a jurisdiction that, although it has not adopted the Pillar 2 rules, has a tax system with similar objectives and measures to those of Pillar 2. The most representative example is that of the United States, with whom the OECD committed to developing this side-by-side system last June 2025.
This safe harbour will be applicable for financial years beginning on or after January 1, 2026 and includes two modalities:
- Side-by-side safe harbour: Reduces the IIR and UTPR to zero if the ultimate parent entity is resident in a jurisdiction that has (i) an eligible domestic tax system (i.e., a minimum nominal rate of 20% and a QDMTT or Corporate Income Tax that contemplates rules tending to make the effective rate 15% or more); or (ii) an eligible worlwide tax system (i.e., which has reasonable taxation mechanisms for the foreign income of its taxpayers or groups).
- UPE safe harbour: Reduces the ultimate parent entity’s top-up-tax to zero if it is tax resident in a jurisdiction with an eligible domestic tax system.
There will be a central OECD record that will list the jurisdictions that are considered suitable to apply these safe harbour modalities.
Although the aim of these measures is to simplify the tax and avoid harmful effects on groups investing in activities eligible for robust and high-quality tax incentives, the resulting system remains very complex and difficult to manage. In addition, although the EU Commission published an agreement on 13 January declaring these measures to be incorporated into the directive, Member States, such as Spain, that have incorporated safe harbours into their own domestic laws, will have to amend those laws so that taxpayers can apply the new measures.
