Pillar Two’s side-by-side relief changes the work—not the workload

Section 1: The regulatory reset

The OECD’s January 2026 Side-by-Side (SbS) package has reset the Pillar Two landscape and provided much-needed clarity on the path forward from a number of perspectives. The headline concept is side-by-side relief for US-parented multinationals. This relief is intended to recognize that the US tax system can sit “side-by-side” with Pillar Two, as existing US tax rules achieve the goals of the global effort. As such, once SbS is enacted in all Pillar Two jurisdictions, the Pillar Two top-up taxes from the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) are no longer applicable to electing US-parented groups beginning in tax years starting on or after January 1, 2026.

However, this relief does not remove Pillar Two from a US multinational’s agenda: It does not eliminate applicability of Qualified Domestic Minimum Top-up Taxes (QDMTTs) nor the requirement to file the GloBE Information Return. In addition, transitional safe harbor rules, always intended to sunset, will be replaced with permanent safe harbor rules. While such permanent safe harbor rules provide relief from computing full-detailed GloBE calculations in every QDMTT jurisdiction, the rules are not simple and require new data points. Thus, the continued landscape requires managing both financial and operational considerations. In summary, relief reduces top-up tax liabilities, but local tax and global compliance still exist.

Section 2: The operational roadmap

Pillar Two readiness is back to the top of the agenda. The new permanent safe harbors, once enacted, are more complex in data and analysis than the transitional safe harbors. Data, process, technology, and governance capabilities should be embedded in the operating model and sustained over time, not treated as a one-time project. The following four focus areas define the practical roadmap for US-parented groups.

2.1 Data strategy: Understand your baseline first

Before designing any data architecture or technology roadmap, taxpayers should conduct a structural gap assessment. The question to answer: What data points does your expected GloBE compliance pathway (full GloBE calculation, Permanent Safe Harbor calculations, and QDMTTs) require that your existing systems don’t already produce at the constituent-entity or jurisdictional level? Most organizations discover that data gaps fall into three categories:

1. Data exists but is not captured at the right level—for example, global tax expense in the ERP, not by jurisdiction; payroll in HR systems, not tied to jurisdictional GloBE constituent entities.
2. Data exists but is not aligned to your consolidated financial statement basis—for example, statutory accounts under local GAAP, not US GAAP; or tax provision at the parent level, not cascaded to subsidiaries.
3. Data does not exist and must be newly sourced—including deferred tax recapture by jurisdiction and by covered tax, qualifying status of tax credits under GloBE rules, Substance-Based Income Exclusion (SBIE)-eligible payroll, Permanent Establishment segregation, and others.
   

A comprehensive gap assessment will identify which of these categories applies to each data requirement and quantify the effort to close the gaps. This assessment is the foundation for every subsequent decision on technology, outsourcing, and timeline.

For US-parented groups, the practical reality is that the reporting burden is likely to shrink (Section 1 of the GIR only for most jurisdictions), but data requirements in foreign QDMTT jurisdictions remain in full. This means your gap assessment must inventory what data is needed to support safe harbor eligibility testing (Transitional CbCR Safe Harbor through 2027, Permanent Safe Harbor from 2027 onward). This assessment often benefits from external support to benchmark against peer practices and to identify which gaps are structural (system design) versus tactical (process discipline).

2.2 Data strategy: Build a single source of truth

Once gaps are understood, the core data strategy is to unify data from multiple source systems into a repeatable, auditable flow. This means integrating:

• HR/payroll data (for jurisdictional headcount, SBIE computation, and pension and stock-based compensation details);
• Legal entity master data (for constituent entity mapping and GloBE classifications);
• ERP financials (for GloBE income and covered taxes); and
• Tax provision data (for deferred tax tracking and covered tax segregation).

Strong data governance is non-negotiable, with clear ownership of entity mapping, adjustment logic, and data quality controls. The forward-looking solution is a tax data architecture—sometimes called a tax data lake—that creates a unified pipeline moving structured ERP data and other source systems into a central repository where tax teams can access reconcilable data for all compliance pathways and test multiple scenarios.

The benefit of this architecture is threefold: It reduces rework (no manual reconciliation across three different versions of the data each year), mitigates the potential for contradictory data sets (the jurisdictional ETR in the safe harbor calculation matches the QDMTT submission), and supports defensibility (every number in the GIR has an audit trail back to source—trial balance, CbCR, tax provision, asset register).

For US-parented groups, this architecture must support all calculations needed today, with flexibility to anticipate changes in the future. For example, while a jurisdiction may be expected to meet the Permanent Safe Harbor currently, thoughtful planning with an eye to the future is needed to ensure data is available if the tax position changes.

2.3 Process: A hub-and-spoke operating model

A resilient Pillar Two operating model for US-parented groups combines centralized control at headquarters with controlled access for subsidiary input. In this hub-and-spoke structure, the headquarters tax team operates as the hub, responsible for building the master GloBE data set, testing safe harbor eligibility, and preparing both the GloBE Information Return and all local QDMTT filings. The headquarters hub receives data from and reconciles with subsidiary-level inputs (the spokes)—including entity-specific payroll figures, local fixed asset values, confirmation of SBIE eligibility, and local tax provision data—but maintains authority over entity mapping, GloBE adjustment logic, and allocation of top-up tax.

The benefit is not just efficiency, but control and defensibility. A hub-and-spoke model can help create a single, auditable answer. It mitigates the risk that a subsidiary files a local return in one jurisdiction using data or assumptions that conflict with the consolidated GloBE data set at headquarters. This operational model demands a cross-functional effort at headquarters, bringing together tax provision, international tax, consolidation, technology, and data governance to ensure consistency from source data through filing and audit defense.

2.4 Systems: Turn ERP limits into an upgrade opportunity

Most legacy ERP environments were not designed with Pillar Two in mind and often lack the data structures, tax sensitization, and traceability needed to support GloBE requirements, including jurisdictional entity mapping, covered taxes, deferred tax attributes, intercompany transactions, and data required for substance-based income exclusion calculations.

A pragmatic approach depends on your ERP roadmap.

• If a cloud migration or ERP transformation is planned within the next two to three years, consider embedding Pillar Two data requirements into the design scope from the outset. Framed this way, what might otherwise be treated as a compliance burden can become part of a broader finance data modernization effort.
• If no imminent cloud migration is planned, invest in a tax data integration layer that sits on top of your existing ERP and consolidates GloBE-relevant data into a central repository. This approach avoids the cost and disruption of an ERP replacement but delivers the data architecture rigor required for compliance. The tax data layer becomes your “source of truth,” extracting data monthly from the ERP and tax provision systems, transforming it to a common basis, validating it against consolidated financial statements, and making it available for both GloBE calculation and QDMTT filing. This intermediate solution can often be implemented within 6–12 months and at a fraction of the cost of a full ERP implementation and can also provide enhancements to your tax processes beyond Pillar Two.
• At the same time, be realistic about the limits of manual processes: Where tax provision or data assembly still depends heavily on spreadsheets, the volume, granularity, and control demands of Pillar Two are likely to expose those weaknesses quickly. In practice, automation and standardization are increasingly important for sustainable compliance, regardless of your ERP strategy.

Section 3: The timeline checklist

Section 4: The end-state operating model

A defensible, end-state compliance operation requires clean data, repeatable processes, and technology infrastructure that scales with the business.

To achieve this, forward-looking tax functions are recognizing that they cannot build and sustain this infrastructure in isolation. Constructing a resilient Pillar Two engine may benefit from engaging external advisers strategically—not merely as surge support during peak filing moments, but as structural partners in the operating model. Outside providers can accelerate and support this transformation across several critical dimensions:

• Setting up tax technology: Moving beyond spreadsheets by implementing tax technology that is specifically built to handle complex Pillar Two math or leveraging a tax service provider.
• Identifying data gaps: Figuring out exactly what data you have, what is missing, and how to fix your systems so you are fully prepared for an audit.
• Connecting data systems: Building the digital bridges between your existing ERPs and your tax software to create a single, reliable source of truth. 
• Managing global filings: Bringing in extra support to help accurately prepare and file both local returns (QDMTTs) and global reports across dozens of different countries.
• Providing ongoing training: Keeping your internal teams up to speed and adaptable as Pillar Two rules and local tax requirements inevitably change.

Final thoughts

The organizations best positioned for success will be those with the most trustworthy data and disciplined processes. This is not merely a compliance exercise; it is a strategic imperative. The ability to deliver clean, auditable data from a unified source will not only mitigate the risk of local overpayments and audit inquiries but will also provide the C-suite with a clearer, more accurate view of the company’s global tax profile. The organizations that embrace this data-first approach now may turn a complex regulatory burden into a more defensible and efficient compliance position—and a better-informed view of their global tax profile going forward.

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