Pillar Two and CAMT: competing paradigms for minimum taxation

A report on a session at the IBA’s 26th Annual US and Europe Tax Practice Trends Conference held in Rome on 17 April 2026

Session Co-Chairs

Annabelle Bailleul-Mirabaud, CMS Francis Lefebvre Avocats, Paris
Kevin M Jacobs, Alvarez & Marsal, Washington, DC

Speakers

Fabio Chiarenza, Gianni & Origoni, Rome
Joe Duffy, Matheson, Dublin
Jessica Kemp, White & Case, London
Francisco Lavandera, Garrigues, Barcelona
John Peterson, Head of Division – Cross Border and International Taxation, OECD Centre for Tax Policy and Administration, Paris

Reporter

Natalia Ishyna
Makery, Munich
natalia.ishyna@makery-group.com

Introduction

Minimum taxation has moved beyond a technical exercise and is now reshaping deal structuring, headquarters decisions and tax risk management. The panel discussed how the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two framework (including the Side‑by‑Side package), the US Corporate Alternative Minimum Tax (CAMT) and emerging UN‑led initiatives are redefining the international minimum tax landscape. The discussion focused on coordination between overlapping regimes, their practical interaction and how multinationals are navigating uncertainty, uneven implementation and strategic trade‑offs in transactions and forward‑looking tax planning.

Panel discussion

The minimum tax landscape

The global minimum tax environment currently consists of three parallel frameworks: (1) OECD Pillar Two, imposing a 15 per cent jurisdiction‑by‑jurisdiction minimum tax; (2) US CAMT, applying a 15 per cent global minimum tax using a blended approach; and (3) the UN tax initiative, which should not be viewed as a competing minimum tax regime but rather as a separate framework focused on reallocating taxing rights.

Despite concerns over fragmentation, the OECD and UN coordinate through information exchange and the Platform for Collaboration on Tax (alongside the International Monetary Fund (IMF) and World Bank). While there is no joint policy mechanism, overlapping delegate participation ensures a degree of alignment as parallel rules evolve.

For non-US practitioners, it is critical to note that CAMT was enacted as a revenue-raiser via the budget reconciliation process, not to align with Pillar Two. Legislative shifts, such as the ‘One Big Beautiful Bill Act’ and subsequent administrative guidance, have further diverged CAMT from Pillar Two by aligning it with regular US tax principles – specifically regarding capitalised repairs, goodwill amortisation and tax credit ordering – creating complexities with no direct Pillar Two equivalent.

Pillar Two vs CAMT: key structural divergences

The panel emphasised that the architectural differences between the two systems are ‘irreconcilable’ and that no amount of guidance can fully bridge the gap:

For Pillar Two, financial statements are the primary driver for the entire GloBE computation. Under CAMT, financial statements are a gating issue used to determine if a corporation is ‘in scope’, but the final tax calculation involves extensive adjustments that hew closer to regular US tax principles.

A recent report by the Institute on Taxation and Economic Policy found that 88 large corporations paid no federal taxes on more than $105bn of income – illustrating the gap between statutory design and real-world outcomes under the current US system. Pillar Two currently treats certain non-refundable credits as a reduction in Effective Tax Rate (ETR), which can trigger a top-up tax, while specific credits under CAMT directly offset the tentative minimum tax before it is compared against regular tax liability, lowering the overall CAMT obligation.

The side-by-side arrangement

Francisco Lavandera guided the audience through the side‑by‑side (SBS) package – a central outcome of recent international tax negotiations, with particular emphasis on the practical operation of the safe harbours.

Under the broad SBS safe harbour, both the IIR and the undertaxed profits rule (UTPR) are effectively switched off for multinational groups for which the ultimate parent entity (UPE) is resident in a country with a qualified SBS regime. To qualify as a SBS regime, a jurisdiction must have:

• an eligible domestic tax system with a nominal rate of at least 20 per cent;
• a corporate alternative minimum tax based on financial statements at an effective rate of at least 15 per cent; and
• no material risk that the ETR on domestic profits falls below 15 per cent.

The US is currently the only country qualifying as a qualified SBS regime. The arrangement reflects the recognition that the US tax system is unlikely to converge materially with the GloBE framework in the foreseeable future. Its primary objective is to avoid ‘tax wars’ and to prevent US multinationals from being subject to overlapping and duplicative minimum tax regimes.

A second, narrower UPE safe harbour also exists that applies where the safe harbour jurisdiction satisfies only the eligible domestic tax system requirement (ie, a nominal rate of at least 20 per cent and a 15 per cent minimum effective tax on domestic profits). The UPE safe harbour deactivates any UTPR that might otherwise apply in a subsidiary jurisdiction with respect to low tax outcomes of the UPE, but the IIR and UTPR remain applicable for other group entities in low-tax jurisdictions. Using the panel’s illustrative example: a multinational group headquartered in a UPE safe harbour jurisdiction that has a Spanish subsidiary would not be subject to Spain’s UTPR in respect of the UPE’s profits, but Spain could still apply the IIR or UTPR to capture top-up tax on a third-country, low-tax entity within the same group. In practice, from a US standpoint, this narrower safe harbour is largely superseded by the broader SBS safe harbour now that the US qualifies under it.

The panel also addressed the 2029 stocktake built into the SBS framework. An audience poll revealed no one anticipated the stocktake resulting in the US losing its qualified SBS status – and panellists agreed this was not the intent. Rather, the stocktake is designed to identify emerging anomalies, arbitrage structures or competitive distortions that may have materialised by that point. Countries could commit to fix identified issues; if they do not, other jurisdictions may apply agreed or unilateral countermeasures. The panel noted the stocktake could equally serve as an opportunity to refine or expand the SBS framework, for example by changing certain qualifying conditions or addressing new forms of tax competition.

Implementation and regulatory uncertainty

Annabelle Bailleul‑Mirabaud outlined the uneven implementation of the new minimum tax regimes, highlighting significant administrative and legal uncertainty: in the European Union, the Commission has recognised the SBS arrangement as a safe harbour under Article 32 of the Pillar Two Directive, a position questioned by some academics under the Meroni doctrine. The panel also noted persistent implementation timing risks as jurisdictions adopt divergent timelines, with Sweden targeting 2027 and Japan’s UTPR applying from April 2026. Switzerland has taken the position that no domestic legislative amendment is required, treating the OECD administrative guidance as directly applicable. Liechtenstein published regulations implementing the SBS with effect from 1 January 2026.

Kevin M Jacobs explained that in the US, a series of Treasury notices has allowed a ‘choose‑your‑own‑adventure’ approach to CAMT compliance. Proposed regulations issued in 2024 were widely criticised, and a re‑proposal is now expected in Q4 2026 (NB: since the panel, Treasury has stated that the guidance will be released in 2027). Practitioners may selectively apply specific notices, including Notice 2025-27 and Notice 2025-49, though the exact scope of permissible reliance (eg, year-by-year or transaction-by-transaction) is unclear.

Practical implications and emerging questions

Joe Duffy questioned whether the SBS framework could reopen limited avenues for tax competition. The panel identified two key dilution effects: the deactivation of the IIR for US-parented groups, reducing incentives for third countries to adopt top‑up taxes, and the non‑application of the UTPR, previously the system’s primary enforcement backstop. This raises the possibility that certain jurisdictions might offer lower effective tax rates to attract US inbound investment, though the panel did not view this as an immediate systemic risk.

The panel also considered whether SBS could incentivise redomestication to the US. Consensus held that tax is rarely decisive in headquarters’ decisions; predictability and stability matter more than marginal rate differences. Pillar Two’s complexity, potential uncertainty and impact on ETRs should be compared with those arising under the US tax system. Jacobs cautioned that US redomestication should not be undertaken lightly, noting that a move to the US is effectively permanent from a tax perspective and should not be driven solely by the SBS framework.

Jessica Kemp highlighted that Pillar Two and CAMT have added a complex new layer to M&A due diligence. Buyers must assess whether a target’s earnings before interest, taxes, depreciation and amortisation (EBITDA) is impacted by Pillar Two, particularly above the €750m revenue threshold, with future tax exposure and compliance costs affecting valuation and deal appetite. Contractual protections are equally challenging: sellers often cannot give clean warranties, leading to difficult negotiations over indemnities and uncertainty around warranty and indemnity (W&I) insurance coverage.

Fabio Chiarenza addressed reporting, disclosure and liability risks. Pillar Two data may constitute market‑sensitive information, potentially triggering immediate disclosure obligations. Joint ventures raise further questions regarding liability allocation, particularly where jurisdictions impose joint and several liability for Pillar Two taxes, as expected in some countries including Italy. This creates material M&A risk, potentially exposing buyers to historical group‑wide top‑up taxes and necessitating enhanced diligence and bespoke contractual protections.

Finally, the panel noted that post‑closing integration remains critical, with many transactions requiring restructuring to unwind tax planning structures that are no longer viable in a Pillar Two environment.

Conclusions

In closing the panel, Bailleul‑Mirabaud highlighted the growing burden of parallel compliance and financial statement preparation, questioning whether additional minimum‑tax‑style regimes may emerge in other major economies, such as China, India or Brazil. Diverging approaches to qualified domestic minimum top‑up taxes (QDMTTs) and local implementation raise not only compliance challenges but also an increasing risk of disputes in the absence of a coordinated dispute resolution framework.

Jacobs concluded by underscoring the practical reality for multinational groups: while Pillar Two outcomes in many jurisdictions are becoming clearer, the US system remains comparatively unpredictable. The key takeaway for practitioners is the need for continuous monitoring across jurisdictions, as global minimum taxation is no longer a singular system, but an evolving network of overlapping rules requiring sustained attention and adaptability.