Top-up taxes – Changes proposed by the OECD and confirmed by the EU

On 5 January 2026, the OECD published a document on the “Side-by-Side Package” on its website. This is another OECD document which, among other things, responds to the current discussions regarding the application of Pillar 2 to the US etc.

This document will probably be added to the commentary on the OECD Pillar 2 rules.

On 12 January 2026, the European Commission confirmed in its communication that the above-mentioned “Side-by-Side Package” would also apply in the EU, specifically for the purposes of the EU Directive on minimum levels of taxation.

The basic parameters of the “Side-by-Side Package” are:

• introduction of a new permanent safe harbour, i.e., simplified effective tax rates – taxpayers would not have to perform a full calculation of the top-up tax (with all exceptions and adjustments), on the other hand, this calculation may be slightly more complicated than the current calculation of the “simplified effective tax rate” under the temporary safe harbour based on CbCR data, application from reporting periods beginning on 31 December 2026 (i.e., effectively from 2027), but in specific cases it can already be used for reporting periods beginning on or after 31 December 2025 (i.e., effectively from 2026);
• extension of the temporary safe harbour based on CbCR data by one year, i.e., also for reporting periods beginning no later than 31 December 2027, and ending no later than 30 June 2029 (i.e., typically 2027 is the last year), whereby the simplified effective tax rate for 2027 should be at least 17%;
• introduction of a new safe harbour for "tax incentives" based on economic substance, which can be used for reporting periods beginning on or after 1 January 2026 – the Czech Republic also lobbied for this (very important for recipients of investment incentives and research and development support);
• introduction of a side-by-side regime for jurisdictions that, to put it very simply, have implemented their own Pillar 2-like rules (but must meet certain criteria set by OECD rules). This regime is primarily intended for the US, which is currently the only country qualified for this regime according to the OECD. The new regime can be used for reporting periods beginning on or after 1 January 2026 – on the other hand, due to the general inapplicability of UTPR rules in 2024 (and the possibility of a safe UTPR harbour in 2025), this new amendment effectively resolves the situation of many groups with a US ultimate parent entity.

It is clear that the issue of Pillar 2 is very much alive and constantly evolving.

If you are subject to or interested in the regulation of top-up taxes, please, do not hesitate to contact our specialists who have the most up-to-date knowledge of the subject.