The G7 issued a statement on global minimum taxes on 28 June 2025 setting out a shared understanding on a Pillar Two side-by-side system. Under the approach, groups whose ultimate parent is in the United States would be fully excluded from two of the main Pillar Two charging rules, the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR), in recognition of the US minimum tax rules to which they are already subject. The statement was released by Canada, which holds the G7 presidency, news reports said.
Corporate INTL Newsroom · Tax
G7 Agrees Pillar Two Side-by-Side Approach for US-Parented Groups
By The Corporate INTL Newsroom · 30 June 2025
What the statement says
According to the text of the statement, the US Treasury Secretary had earlier outlined US concerns about the Pillar Two rules agreed by the OECD/G20 Inclusive Framework on BEPS and proposed the side-by-side solution. The G7 discussions considered the respective minimum tax regimes, recently proposed changes to the US international tax system in the Senate amendment of the One Big Beautiful Bill Act, the removal of section 899 from the Senate version of that bill, and the success of Qualified Domestic Minimum Top-up Tax (QDMTT) implementation.
The understanding rests on four 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;
- it would include a commitment to address any substantial risks to the level playing field or of base erosion and profit shifting;
- work would proceed alongside material simplifications to the overall Pillar Two administration and compliance framework;
- work would also consider changes to the Pillar Two treatment of substance-based non-refundable tax credits, to align them more closely with refundable credits.
The G7 also stated that the removal of section 899, a proposed US retaliatory tax measure, is crucial to the overall understanding.
What it does not change
The statement is not itself a change in law. Pillar Two rules already enacted by individual countries continue to apply until amended, and the statement does not refer to any exclusion from QDMTTs, which countries apply to profits arising in their own territory.
What happens next
The G7 said the issues are relevant to a wider group of jurisdictions and that it looks forward to developing the understanding within the Inclusive Framework, with a view to reaching a solution acceptable and implementable to all. Multinational groups, particularly those with US parents and those competing with them, will need to monitor the Inclusive Framework negotiations and any resulting changes to domestic legislation.
Sources
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