Tax experts at KPMG LLP said Tuesday that an agreement by the Organization for Economic Cooperation and Development (OECD) to set a global minimum tax rate for large multinational companies will stabilize the tax situation for U.S. businesses, but may not immediately reduce short-term computational complexity or compliance risks.

Under pressure from the Trump administration, 147 countries last week reached a "parallel" agreement that established a safe harbor, exempting large U.S. companies from certain requirements of the OECD framework, known as "Pillar Two." Pillar Two is a set of rules designed to impose a global minimum tax rate of 15% on multinational companies.

This tax system, previously supported by former President Joe Biden's administration, aimed to close tax havens and curb international tax avoidance, and legislators from various countries struggled for years to reach an agreement. The Trump administration had opposed Pillar Two, claiming that current U.S. corporate tax law already establishes a robust minimum tax system for U.S. companies. The United States is a founding member of the OECD, an organization composed of 38 countries that promotes global economic standards.

Transitional Volatility

Taxpayers without overseas operations or with combined revenue below 750 million euros (approximately $873 million) are not subject to Pillar Two, while the agreement reached on January 5 exempts eligible U.S. companies from Pillar Two's Income Inclusion Rule and Undertaxed Profits Rule.

However, the agreement retains the Qualified Domestic Minimum Top-up Tax, allowing non-U.S. countries to impose at least a 15% tax on U.S. multinational companies on a country-by-country basis. These companies may benefit from foreign tax credits against the top-up tax. Notably, the Trump administration did not oppose the Qualified Domestic Minimum Top-up Tax portion of Pillar Two.

KPMG tax experts predicted during a webinar held by this Big Four accounting firm on January 13 that, in the long term, U.S. companies will generally benefit from the OECD rules.

Alistair Pepper, a managing director at KPMG, said: "I think, looking ahead to 2027 and 2028, the world will become simpler, but right now we are in a period of volatility where we need to navigate various changes."

In another webinar on January 13, Manal Corwin, director of the OECD Centre for Tax Policy and Administration, praised the agreement, saying it demonstrates global collaborative efforts to prevent multinational companies from engaging in unreasonable tax avoidance. She said: "Last week's outcome shows that there remains broad global commitment to the importance of tax cooperation, the commitment to provide certainty, and the use of the minimum tax as a policy tool to address distortions and protect the tax base."

Speed of Legislation is Key

Marcus Hyland, a principal at KPMG, said that because tax jurisdictions have not yet incorporated the "parallel" agreement into domestic law, U.S. companies may still need to complete all Pillar Two calculations this year, despite the exemption. Hyland said: "The exemption is not yet legislated; it is only part of the OECD agreement. We expect that, until countries actually implement the 'parallel' safe harbor, at least publicly traded companies will still need to make provisions for the full set of Pillar Two rules."

Hyland said: "My expectation is that in the short term (e.g., within the next three months), a few jurisdictions will be able to implement the 'parallel' agreement, but a large number of jurisdictions will need 6 to 12 months to implement it." Pepper noted that, for example, the UK has publicly stated it will adopt the exemption, but implementing these changes through its budget process could take up to 15 months.

Other experts share the same view. Keith Reimer, a partner at PwC, said during a PwC webinar on January 14: "Administrative guidance issued by the OECD is generally not considered law, and most jurisdictions need to incorporate that guidance into local legislation." Reimer said: "The overall key theme for companies is that they all need to closely monitor legislative developments around the world, not only in 2026, but also in the coming years, as countries incorporate OECD administrative guidance into local law."

Hyland said that provisions in EU law and U.S. Generally Accepted Accounting Principles regarding the effective dates of international agreements may help expedite this process.

No Retroactivity

Because the safe harbor does not apply retroactively, some companies will still be subject to all Pillar Two rules for the 2024 and 2025 tax years. However, experts agree that the OECD agreement may simplify compliance for U.S. taxpayers for tax years beginning on or after January 1, 2026.

Companies will also be able to simplify filings by customizing information returns for specific tax jurisdictions. Michael Plogian, a principal at KPMG, said the agreement's simplification measures are "good news for everyone," and the OECD has also indicated it will continue efforts to simplify global tax rules. Plogian also noted that further coordination is needed in the future between the "parallel" agreement and other OECD tax rules, including intercompany financing rules and transfer pricing adjustment rules.

Pepper said that the January 5 OECD agreement is worded in such a way that the United States is the only country eligible for the safe harbor.