Through the OECD, nearly 150 nations have reached an updated Global Tax Agreement that builds on the 2021 framework to prevent big multinational corporations from transferring profits. The revised agreement creates a “side-by-side” arrangement that essentially shields multinational corporations with headquarters in the United States from the 15% global minimum tax, guaranteeing that they continue to be primarily subject to U.S. tax laws while other businesses are subject to the full Pillar Two regulations.
This Global Tax Agreement, which was announced on January 5, 2026, is the result of months of discussions and specifically addresses U.S. concerns following the Trump administration’s declaration that the original agreement would have “no force or effect” in the United States.OECD Secretary-General Mathias Cormann hailed it as a “landmark decision in international tax co-operation” that “enhances tax certainty, reduces complexity, and protects tax bases.”
U.S. Treasury Secretary Scott Bessent described the outcome as “a historic victory in preserving U.S. sovereignty and protecting American workers and businesses from extraterritorial overreach.”
Origins and Evolution
In order to stop corporations like Apple and Nike from using complex accounting techniques to transfer revenues to low-tax havens like Bermuda or the Cayman Islands, the original 2021 worldwide Tax Agreement imposed a 15% worldwide minimum tax. The goal of this was to stop the global “race to the bottom” in corporate taxation.
Janet Yellen, the former Treasury Secretary, was a major supporter of the agreement, emphasizing its importance in fostering fairer competition. Republicans in Congress, however, criticized it, claiming it would hurt America’s economic competitiveness.
In 2025, the Trump administration renegotiated the terms. A significant success occurred in June, when Republicans eliminated a planned “revenge tax” provision from major tax legislation—a proposal that would have penalized foreign businesses from nations imposing unfair taxes on U.S. firms. In exchange, the G7 partners backed the side-by-side arrangement.
This system accepts U.S. domestic laws, such as the GILTI regime, as sufficient to protect a typical US multinational corporation from overseas top-up taxes. Most provisions will be implemented beginning in fiscal years 2026.
Implications for US Multinational Company
The exemption gives significant assistance to a US multinational company by decreasing compliance costs and potential double taxation while maintaining investment incentives in the United States. The agreement permits these corporations to function under familiar U.S. tax laws, even while the broader agreement applies to non-U.S. headquartered groups.
Republicans in Congress celebrated the improvements. Senate Finance Committee Chair Mike Crapo, R-Idaho, and House Ways and Means Committee Chair Jason Smith, R-Mo., said in a joint statement that “today marks another significant milestone in putting America First and unwinding the Biden Administration’s unilateral global tax surrender.”
Advocates for tax transparency, on the other hand, expressed deep worry. “This deal risks nearly a decade of global progress on corporate taxation by allowing the largest, most profitable American companies to keep parking profits in tax havens,” said Zorka Milin, policy director of the FACT Coalition, a tax transparency NGO.
Critics worry that exempting key US players will reduce expected income for other nations and hamper efforts to tackle aggressive tax avoidance.
Looking Ahead: Global Tax Agreement
The impact of the updated Global Tax Agreement, which goes into force in 2026, will be felt over time. The side-by-side approach protects a US multinational company from additional foreign taxes, providing better stability and boosting American competitiveness.
At the same time, the exemption may limit income gains for other nations, requiring future modifications if profit shifting continues. The agreement is still a work in progress, balancing US sovereignty with global cooperation, and its long-term success will be determined by how well it reduces tax avoidance without dividing international standards.
