The EPRS “At a Glance” note (15 September 2025) reports that under the G7 Statement, US-parented groups will be excluded from Pillar 2’s IIR and UTPR, with US GILTI and Net CFC Tested Income rules applying alongside the global minimum tax framework.

The European Parliamentary Research Service (EPRS) has clarified that US-based multinational groups will not be subject to the Pillar 2 Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR). Instead, the US framework, particularly the GILTI and Net CFC Tested Income regimes, would continue to operate alongside Pillar 2.

The EPRS made the announcement and published an “At a Glance” report on 15 September 2025.

NCTI and Pillar 2

As Pillar 2 and the US’ GILTI (now called ‘NCTI’ under the OBBBA) operate on different principles and design features, it is difficult to assess to what extent the side-by-side approach could raise concerns about a level playing field or lead to base erosion and profit shifting among the multinational companies subject to each regime. Potential competitive disadvantages arise not only from differences in direct tax liabilities but also from the variations in the administrative and legal complexity of the respective regimes.

The OBBBA, signed into law in July 2025, introduced several adjustments allowing NCTI to more accurately reflect the real outcomes of Pillar 2. It increased the effective tax rate to 14 % (up from 13.125 %) and removed the carve-out for the Qualified Business Asset Investment (QBAI), thereby broadening the taxable base.

EPRS Side-by-side? The future of Pillar 2 minimum corporate tax rules

However, a key difference between the two systems remains: the “blending” of income. Pillar 2 requires corporate groups to meet a minimum level of tax in each jurisdiction where they operate (‘jurisdictional blending’), while the US’ NCTI allows income and foreign taxes to be blended across all foreign countries (“global blending”). This way, low-taxed income can be offset with high-taxed income elsewhere and profits in some jurisdictions can be reduced by losses in others.

Additionally, the OBBA introduced broader corporate tax changes, such as permanent expensing for domestic R&D investments and a higher interest deductibility cap, to enhance US competitiveness.

Pillar One

The G7’s statement noted that the delivery of the side-by-side system “will facilitate further progress to stabilise the international tax system, including a constructive dialogue on the taxation of the digital economy”, referencing the negotiations on Pillar One. During the September 2025 plenary session, in response to questions from Members of the European Parliament on Pillar One and the prospects for a European digital services tax (DST), the European Commission acknowledged that Pillar One discussions were “on hold” but could resume once a Pillar 2 solution is reached. To give the OECD-led process space and time to deliver, the Commission stated that it does not intend to table a new proposal for a DST at this stage.

Several countries have already implemented or announced digital services taxes (DSTs), with revenues steadily increasing over time, showcasing the continuous growth of the digital economy. In 2023, Spain, Italy and France collectively generated EUR 1.4 billion from their DSTs. However, estimating the revenue potential of an EU-wide DST would heavily depend on key design parameters, such as the definition of in-scope activities (the types of digital services or business activities that would fall under the tax), the applicable tax rate, and the revenue thresholds.