The OECD/G20 Inclusive Framework has announced significant simplifications to the Global Anti-Base Erosion (GloBE) Rules under Pillar Two. The newly agreed safe harbours, detailed in a 5 January 2026 Side-by-Side Package, aim to reduce administrative burdens for multinational enterprise (MNE) groups while preserving the rules’ core objectives.
Key measures include a Side-by-Side Safe Harbour, exempting groups from the Income Inclusion Rule (IIR) and Undertaxed Payments Rule (UTPR) if their ultimate parent entity (UPE) resides in a jurisdiction with both eligible domestic and worldwide tax regimes. An UPE Safe Harbour protects domestic profits in the parent jurisdiction from the UTPR where only an eligible domestic regime exists.
Practically, the Substance-based Tax Incentive (SBTI) Safe Harbour allows certain Qualified Tax Incentives (QTIs) to be treated as covered taxes, addressing a critical issue for entities in jurisdictions offering substantive tax incentives. Most notably, a permanent Simplified Effective Tax Rate (ETR) Safe Harbour will be available from 2026/2027, alongside a one-year extension of the Transitional CbCR Safe Harbour.
Impact & Practical Considerations:
These safe harbours will substantially streamline GloBE compliance for in-scope MNEs, particularly those with parents in qualifying jurisdictions or those benefitting from QTIs. Groups must immediately assess their eligibility against the new criteria. The simplification package reduces the need for complex GloBE calculations for many entities, allowing tax and finance teams to reallocate resources. However, careful analysis of “eligible” regimes and QTI conditions is essential to avoid misapplication. Preparations for the Simplified ETR Safe Harbour should begin now, given its imminent implementation.
Source: OECD website, 6 January 2026