The US Treasury announced the G7’s agreement to exempt US companies from Pillar Two taxes, with plans to expand this exemption globally through the OECD-G20 Inclusive Framework.

The US Treasury published the G7 Statement on Global Minimum Tax on 28 June 2025. This follows Treasury Secretary Scott Bessent’s announcement of a G7 agreement to exempt US companies from Pillar Two taxes (IIR and UTPR), with plans to extend this across the OECD-G20 Inclusive Framework.

In exchange, the US will drop the proposed Tax Code Section 899 in the One Big Beautiful Bill, which advanced in the US Senate on 28 June 2025. Section 899, “Enforcement of Remedies Against Unfair Foreign Taxes,” allows for increased US taxes on foreign countries with taxes, such as the Pillar Two UTPR, digital services taxes (DSTs), diverted profits taxes (DPTs), or other extraterritorial taxes.

The US House Ways and Means Committee passed the Big, Beautiful Bill by the House of Representatives on 22 May 2025.

G7 Statement on Global Minimum Tax

Earlier this year the US Secretary of the Treasury outlined the United States’ concerns regarding the Pillar Two rules agreed by the OECD/G20 Inclusive Framework on BEPS and set out a proposed ‘side-by-side’ solution under which US parented groups would be exempt from the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) in recognition of the existing US minimum tax rules to which they are subject.

Following discussions on this issue – which were informed by analysis of the respective minimum tax regimes, including consideration of recently proposed changes to the US international tax system based on the Senate amendment of H.R. 1 (introduced June 16, 2025), the One Big Beautiful Bill Act (OBBBA), the removal of section 899 in the Senate version of the OBBBA, and consideration of the success of Qualified Domestic Minimum Top-up Tax (QDMTT) implementation and its impact – there is a shared understanding that a side-by-side system could preserve important gains made by jurisdictions in the Inclusive Framework in tackling base erosion and profit shifting and provide greater stability and certainty in the international tax system moving forward.

This understanding, which builds on our continued commitment to collaborate jointly through the Inclusive Framework to address the potential risks of base erosion and profit shifting, is based on the following accepted principles:

  • A side-by-side system would fully exclude US parented groups from the UTPR and the IIR in respect of both their domestic and foreign profits.
  • A side-by-side system would include a commitment to ensure any substantial risks that may be identified with respect to the level playing field, or risks of base erosion and profit shifting, are addressed to preserve the common policy objectives of the side-by-side system.
  • Work to deliver a side-by-side system would be undertaken alongside material simplifications being delivered to the overall Pillar Two administration and compliance framework.
  • Work to deliver a side-by-side system would be undertaken alongside considering changes to the Pillar Two treatment of substance-based non-refundable tax credits that would ensure greater alignment with the treatment of refundable tax credits.

Delivery of a 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 and on preserving the tax sovereignty of all countries.

We recognise that these issues have relevance to a wider group of jurisdictions and look forward to discussing and developing this understanding, and the principles upon which it is based, within the Inclusive Framework with a view to expeditiously reaching a solution that is acceptable and implementable to all.

We also recognise that the removal of section 899 is crucial to this overall understanding and to providing a more stable environment for discussions to take place in the Inclusive Framework.