Pillar Two after the side-by-side deal: what it means for groups across India and the United States

On 5 January 2026 the OECD published its side-by-side package, the compromise that lets US-parented multinationals operate largely outside the global minimum tax rules while the rest of the world keeps them. For groups that span India and the United States, the package answers some questions and sharpens others. The headline is simple: the global minimum tax has not gone away, it has changed shape.

A short recap of Pillar Two

Pillar Two, formally the GloBE rules, aims to ensure that large multinational groups, broadly those with consolidated revenue of at least EUR 750 million, pay an effective tax rate of at least 15% in every jurisdiction where they operate. Where a jurisdiction's effective rate falls short, a top-up tax is collected through three mechanisms, applied in order: a qualified domestic minimum top-up tax (QDMTT) in the low-taxed country itself, an income inclusion rule (IIR) at the parent, and an undertaxed profits rule (UTPR) as a backstop in other group jurisdictions.

What the side-by-side package does

The United States withdrew its support for the global minimum tax in January 2025, and a G7 statement in June 2025 accepted that the US minimum tax regime should operate alongside GloBE rather than inside it. The January 2026 package gives that agreement effect. Its main elements are:

• A side-by-side safe harbour: groups whose ultimate parent is in a qualifying jurisdiction are relieved from the IIR and UTPR for fiscal years beginning on or after 1 January 2026. At publication, the United States was the only jurisdiction recorded as qualifying.
• QDMTTs still apply: the relief does not switch off domestic minimum taxes. A US-parented group's subsidiary in a country with a QDMTT still pays top-up tax there.
• A permanent simplified effective tax rate safe harbour, based on financial accounting data, to replace full GloBE calculations where a jurisdiction is clearly above 15%.
• An extension of the transitional country-by-country reporting safe harbour, and a new safe harbour for qualifying substance-based tax incentives such as expenditure-based credits.

Obligations for 2024 and 2025 are unaffected. Groups that were in scope in those years still need to complete those returns and elections.

Where India stands

India took part in the OECD Inclusive Framework negotiations, but at the time of writing it has not enacted an income inclusion rule, an undertaxed profits rule or a domestic minimum top-up tax. The Income-tax Act, 2025, in force from 1 April 2026, consolidated the existing law without adding them. With a standard corporate rate of 22% before surcharge and cess, most Indian operating companies sit comfortably above 15%; the exposure arises where profits benefit from tax holidays, special economic zone deductions or other incentives that pull the effective rate down.

What this means in practice

US-parented groups with Indian subsidiaries

From 2026 these groups are largely outside the IIR and UTPR, and India has no QDMTT, so a low-taxed Indian entity is unlikely to trigger GloBE top-up tax today. That is not the end of the analysis. Other subsidiaries in countries that have QDMTTs, which include most EU member states, the United Kingdom, Japan and others, remain exposed. And the US regime that sits beside GloBE has its own minimum tax on foreign income, which needs modelling in its own right.

India-headquartered groups with overseas subsidiaries

An Indian parent above the revenue threshold is not relieved by the side-by-side safe harbour, because India does not qualify for it. India not having an IIR means the parent does not collect top-up tax at home, but its subsidiaries in QDMTT countries pay domestic top-up tax where they are low-taxed, and UTPR jurisdictions could in principle collect top-up tax on low-taxed group entities, including in India. Data collection and the GloBE information return remain live obligations wherever the group operates in an implementing country.

Groups below the threshold

Most mid-sized groups are below EUR 750 million and outside Pillar Two entirely. For them the relevance is indirect: customers, acquirers and investors who are in scope will ask questions in diligence, and incentives designed to attract investment may be redesigned as more countries adopt minimum taxes.

Five questions for the board

• Is the group in scope today, and on current growth plans, when will it be?
• In which jurisdictions does the effective tax rate fall below 15%, and why?
• Which tax incentives does the group rely on, and do they qualify under the new substance-based safe harbour?
• Can the simplified ETR or transitional safe harbours remove full calculations, and does the finance data support them?
• Who owns Pillar Two monitoring as India's position and other countries' rules continue to move?

The bottom line

The side-by-side deal makes life simpler for US-parented groups, but it does not make the global minimum tax disappear. Domestic minimum taxes are now the main collection mechanism worldwide, and India's own position may change in a future budget. Groups operating across India and the United States should treat 2026 as the year to map their effective tax rates by jurisdiction, test their incentives against the new safe harbours and put the data in place before the next change arrives.

Sources

• OECD, Side-by-Side Package: administrative guidance on the GloBE Model Rules, 5 January 2026
• BDO, OECD releases guidance on side-by-side system, January 2026
• PwC, Tax Policy Bulletin: OECD publishes Pillar Two side-by-side system, January 2026
• MHA, Pillar Two: OECD side-by-side package, January 2026
• Commentary on India's Pillar Two status: AZB & Partners via Bloomberg Tax; OECD Pillars developments tracker, 2026

This article reflects the position at the time of writing and is general information, not advice. Pillar Two rules and India's position may change; speak to an advisor before acting.