U.S. Pillar 2 Deal May Spur Other Nations to Seek Exemptions

Tax attorney Joshua Odintz was cited in a Law360 article examining how a newly finalized Pillar Two "side-by-side" safe harbor for the United States could prompt other jurisdictions to seek similar carveouts from the global minimum corporate tax, potentially adding strain to the international framework. The article explained that although Pillar Two was designed to operate as a harmonized system of top-up taxes, the Organization for Economic Cooperation and Development's (OECD) recognition of alternative minimum tax regimes may encourage countries with their own rules to argue they meet the safe harbor's domestic and foreign tax requirements, particularly to avoid exposure to the undertaxed profits rule (UTPR). It also noted that companies may still be subject to a qualified domestic minimum top-up tax (QDMTT), which allows countries to "top up" local effective tax rates to the 15 percent minimum. Mr. Odintz pointed to Brazil as one example of a country that may pursue this path.

"[Applying for safe harbor treatment] is going to be the path of countries that believe they have sufficient rules," he said.

Mr. Odintz also co-authored a Holland & Knight alert on this topic.

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