The G7's recent announcement about a potential exemption for some US-based multinationals from certain aspects of Pillar 2 has created a stir, as Jacob Fulton of Orbitax explains an interview with the Thomson Reuters Institute
Key takeaways:
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Understanding the announcement — The G7 “exemption” is an informal understanding, not a legal change.
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Rules still in effect — Pillar 2 rules remain in effect across most jurisdictions, and US multinationals must still comply. Compliance and reporting obligations will continue and may increase.
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Corporate tax departments need to keep informed — Tax departments should stay the course and be prepared to adapt as guidance evolves.
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The global tax landscape is in flux, especially for US multinationals navigating Pillar 2’s global minimum tax rules. The G7’s recent announcement of a potential exemption for US-parented groups from certain aspects of Pillar 2 has raised questions and cautious optimism. To provide clarity on this issue, Jacob Fulton, Head of the Quantitative Tax Practice for Orbitax, shares his insights with Nadya Britton of the Thomson Reuters Institute (TRI).
Nadya Britton (TRI): The G7’s June announcement about a Pillar 2 exemption for United States-based multinationals created a stir. Can you explain what this actually means?
Jacob Fulton (Orbitax): The announcement suggested that G7 countries — led by the US, Canada, and the United Kingdom — had reached an understanding to exclude US-parented groups from the Income Inclusion Rule and Undertaxed Profits Rule under Pillar 2. On its face, it sounded like significant relief for US multinationals.
However, there’s little detail on how this would work in practice. The statement is more of a political commitment than a change in law. The Qualified Domestic Minimum Top-up Tax (QDMTT) remains in place, and the legislative removal of Section 899 from the One Big Beautiful Bill in the US doesn’t change the current Pillar 2 obligations for multinationals. So, while the announcement sounds promising, it introduces more questions and uncertainty rather than offering clear, immediate relief.
Britton: Given the uncertainty, should the in-house tax departments of US multinational change their approach to Pillar 2 compliance?
Fulton: No, they should not — the G7’s understanding doesn’t override existing laws. More than 50 jurisdictions have enacted Pillar 2 legislation, and those rules remain in force. For tax years 2024 and 2025, US multinationals are still subject to the same compliance and reporting obligations as before.
It’s important for corporate tax departments to stay the course. While there may be future guidance, we don’t know the timeline or the specifics. Delaying or pausing Pillar 2 implementation based on this announcement would be risky and could leave companies noncompliant if nothing changes.
Britton: What about tax planning? Is there an opportunity for companies to adjust their strategies in light of the G7 announcement?
Fulton: Not really. The current uncertainty makes tax planning more complex, not less. While it’s tempting to consider planning opportunities, there’s no concrete framework for how the exemption would be applied, or even if the exemption will be applied.
The Pillar 2 regime already contains robust transition rules designed to prevent companies from exploiting gaps or planning opportunities during the rollout. Any new guidance could target retroactive planning aimed at leveraging this potential exemption. Until there’s greater clarity, companies should be cautious and avoid making significant planning changes based on speculation.
Britton: Beyond the exemption, what broader challenges does Pillar 2 present, especially now?
Fulton: Pillar 2 was initially envisioned as a uniform global minimum tax, but in practice, it’s fragmented. Each jurisdiction has implemented the rules on different timelines and with varying interpretations. The G7’s move may add further complexity, as only a few countries are part of this understanding. In fact, most jurisdictions have not agreed to adjust their laws to this point, so US multinationals could face inconsistent rules and additional compliance requirements.
If only some countries adopt the exemption for US groups while others do not, companies may need to navigate a patchwork of rules, increasing the risk of errors and duplicative reporting. This environment heightens the need for robust technology solutions to manage calculations, track legislative changes, and handle complex reporting obligations.
Britton: Does this mean the compliance burden for US multinationals is likely to increase?
Fulton: Yes, absolutely. The G7 announcement, rather than simplifying things, adds another layer of complexity. Even if some countries provide relief, others may not, so corporate tax departments need to be prepared for additional filings and ongoing compliance rules in multiple jurisdictions.
For example, even where the Global Anti-Base Erosion (GloBE) Information Return might not be required due to an exemption, local jurisdictions may impose increased QDMTT reporting or other compliance burdens. Each country’s requirements are unique, and in many cases, they apply regardless of whether a tax liability exists. The compliance workload will not decrease in the near term.
Britton: Given all this, what should in-house tax departments be doing right now?
Fulton: Tax departments should continue with their current Pillar 2 compliance and implementation plans. It’s critical to keep up with local legislation, maintain documentation, and be prepared for reporting in every jurisdiction in which it’s required.
Investing in technology is more important than ever. Automated solutions can help track legislative changes, manage calculations, and streamline reporting. As the rules evolve and complexity increases, manual approaches will struggle to keep pace.
Finally, corporate tax teams should stay engaged with industry groups and advisors, monitor new guidance closely, and be ready to adapt as the situation develops.
Britton: Any final thoughts for US multinationals navigating this evolving landscape?
Fulton: The G7’s announcement is a headline, not a new law — and it doesn’t change the immediate reality for US multinationals. The best course is to continue preparations, invest in robust technology, and remain vigilant for further developments.
As Pillar 2 evolves, flexibility and readiness to adapt will be critical. While the promise of an exemption is attractive, the reality is increased complexity and ongoing compliance obligations for the foreseeable future.
