The European Commission has confirmed that the OECD Inclusive Framework’s Side-by-Side safe harbour arrangement, agreed on 5 January 2026, applies under the EU’s Pillar 2 Directive, introducing new and expanded safe harbours to ease compliance and support the global minimum tax framework.

RF Report

The European Commission, in a notice on 12 January 2026, acknowledged the Side-by-Side arrangement on Safe Harbours and confirmed its application within the framework of Council Directive (EU) 2022/2523 (Pillar 2 Directive).

Under Article 32 of the Directive, Member States may allow, at the option of the filing constituent entity, the top-up tax for a jurisdiction to be deemed zero for a fiscal year where the conditions of a qualifying international safe harbour agreement is met. Such an agreement is defined as one that has been consented to by all Member States and allows in-scope groups to elect to benefit from one or more safe harbours.

The side-by-side package includes five key components:

  • First, a series of simplification measures will reduce compliance burdens for multinational enterprises (MNEs) and tax authorities in calculating and reporting under the global minimum tax rules.
  • Second, the package further aligns the treatment of tax incentives globally through the introduction of a new targeted substance-based tax incentive safe harbour.
  • Third, new safe harbours are available to MNE Groups having an ultimate parent entity located in an eligible jurisdiction which meets minimum taxation requirements.
  • Fourth, the package includes an evidence-based stocktake process to ensure a level playing field is maintained for all Inclusive Framework Members.
  • Fifth, the package reinforces the objective that qualified domestic minimum top-up tax regimes remain a primary mechanism in the global minimum tax framework for ensuring the protection of local tax bases, particularly in developing countries.

Earlier, on 5 January 2026, the OECD Inclusive Framework, with the consent of all Member States, adopted several safe harbors, including the Simplified ETR Safe Harbour, an extension of the Transitional CbCR Safe Harbour, the Substance-based Tax Incentive Safe Harbour, and the Side-by-Side system, which consists of both the Side-by-Side Safe Harbour and the Ultimate Parent Entity (UPE) Safe Harbour.