Tax News & Views International Weekly: Pillar Two Back Taxes

The United States got a lot of what it asked for in the negotiations with the Organization for Economic Cooperation and Development over the 15% global minimum tax. Thanks to the side-by-side agreement worked out between the Trump administration and officials from other OECD member countries, businesses won't have to worry about paying the primary taxes under the new regime, also known as Pillar Two.

But one thing it didn't get was full retroactivity for the agreement. While companies will be exempt from most (though not all) Pillar Two taxes for 2026 and onward, the system still applies for the 2024 and 2025 tax years. While only a temporary issue, it could still be a significant headache for many companies that have been worried about the compliance costs for the detailed and often complex OECD system.

Retroactivity became a non-starter for both political and administrative reasons—especially as most countries had already enacted Pillar Two laws, and the European Union had issued a Pillar Two directive that still stands. This is also why the elements of the side-by-side agreement are designed as “safe harbors,” in theory to help administer established laws.

While the new safe harbors will only apply for 2026 and onward, companies will be able to use pre-existing safe harbors, including the “transitional” country-by-country reporting (CBCR) safe harbor and the under-taxed profits rule (UTPR) safe harbor. The CBCR allows companies to use global reports, already required under transparency rules, to comply with the Pillar Two reporting requirements. And the UTPR exempts companies in jurisdictions with at least a 20% statutory corporate tax rate—the U.S. rate is 21%—from the under-taxed profits rule, one of the taxing tools countries have threatened to use against U.S. entities.

Both of those safe harbors were meant to be temporary, but the UTPR safe harbor was extended until the end of 2025, and the CBCR safe harbor will be operative through 2027.

Those two rules may deal with the biggest potential compliance challenges, but there are always cases that will slip between the cracks. U.S. companies may have to worry about subsidiaries in other countries being subject to Pillar Two taxes, for instance. While the big story is that U.S. companies won’t have to deal with the most onerous effects, this is one of several ways that they won’t be able to ignore Pillar Two, either.

Noteworthy Items This Week

Corporate America Finally Reveals (Some of) Its Tax Secrets – Richard Rubin and Theo Francis, The Wall Street Journal:

Together, the top six companies reported paying more than $53 billion in cash federal income taxes, or 13% of total collections. The top 43 companies—those paying at least $1 billion apiece—generated more than a quarter of U.S. corporate tax revenue in 2025.

Some companies got federal refunds. That includes JPMorgan Chase’s $1.1 billion. The bank paid more than $6.4 billion to other jurisdictions, including $987 million to the U.K., $582 million to India and $538 million to New York state. According to the company, the refund stemmed from paying too much in tax in prior years.

Companies’ Big Use of ‘Tax Havens’ to Be Hit With New Obstacles – Michael Rapoport, Bloomberg Tax:

As new details emerge of how major US companies like Merck & Co., AbbVie Inc., and Caterpillar Inc. book profits in offshore “tax havens” to cut their taxes, recent transparency requirements and international tax changes could now make the money-saving strategy less attractive.

New Jersey-based Merck paid Switzerland $2.1 billion in taxes last year, and AbbVie paid Ireland $431 million and Puerto Rico $297 million, according to the companies’ annual reports.

The numbers come from newly required disclosures about the makeup of companies’ tax bills that have been closely held in the past. Advocacy groups and other observers have long suspected that many companies try to avoid taxes by parking profits in jurisdictions offering them lower tax rates or other tax breaks.

4 Open Questions On Tariff Refund System Development – Dylan Moroses, Law360 Tax Authority ($):

Trade lawyers raised several open questions about the system being developed by CBP. Among those are whether all the duties Trump authorized under the IEEPA will be a part of the new refund system and how the government would honor the U.S. Court of International Trade's eventual ruling on the refund process.

The trade court initially ordered CBP to immediately begin issuing all refunds for funds collected by Trump's global tariff regime propped up by the IEEPA, which the Supreme Court struck down in February.

Questions also remain about how those duty calculations may interact with other tariffs that have been implemented and implicated as part of trade agreements underpinned by the now-defunct IEEPA tariff regime.

U.N. Transfer Pricing Panel Approves Ambitious Guidance Plan – Alexander F. Peter, Tax Notes ($):

During a March 24 meeting of the U.N. Committee of Experts on International Tax Cooperation in New York, members of the transfer pricing subcommittee adopted a workplan to provide practical guidance on implementing the arm's-length principle in cross-border transactions between related entities, with an emphasis on the needs and priorities of developing countries. Such guidance should take into consideration those countries' administrative constraints and their limited access to reliable comparability data, the plan says.

The transfer pricing subcommittee was established during the U.N. tax committee's 31st session in October 2025 in Geneva, where a rough outline for the 2025 to 2029 term was drafted.

Digital Tax Tensions Play Out as UN Tackles Country Divides – James Munson, Bloomberg Tax ($):

Developed countries in United Nations tax-treaty negotiations have shown an appetite for new approaches to taxing the digital economy, opening some potential for agreement with developing nations that are spearheading the UN talks.

But the work is far from coalescing around an approach — a decision that, once taken, could put the UN on a collision course with any future deal at the Organization for Economic Cooperation and Development, where US opposition to a long-stalled agreement on digital economy taxation keeps the matter in limbo.

Public Domain Superhero of the Week

Every week, a new character from the Golden Age of Comics, who’s fallen out of use.

This week’s entry: Prince Mengu

Debut Year: 1947

Debut Publication: Moon Girl and the Prince

Origin Story: The partner to Moon Girl, he too traveled from their homeworld to Earth and fights crime.

Superpowers: Super-strength, although he lost in ritual combat to Moon Girl.

Eide Bailly's International Tax Team and our affiliates at HLB, The Global Advisory and Accounting Network, stand ready to assist with your worldwide tax needs.

Tax News & Views International Weekly: Pillar Two Back Taxes

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Alex Parker