On January 5, 2026, the OECD released the SbS package, containing five key elements:

1. SbS SH

The main element is the SbS Safe Harbour (SH), which eliminates Top‑up Tax (TuT) under the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) for MNEs whose Ultimate Parent Entity (UPE) is located in a jurisdiction with a “Qualified SbS Regime”. This requires, among others, that the UPE tax system meets domestic and worldwide requirements, including a minimum rate and a CFC regime covering active and passive income. At this stage, only the US qualifies for this SH.

Qualified Domestic Minimum Top-up Taxes (QDMTTs) remain fully applicable for US MNEs, and they must still follow the P2 compliance obligations.

The SbS SH applies to financial years starting as of January 1, 2026.

2. UPE SH

MNEs can elect the UPE SH for jurisdictions with a “Qualified UPE Regime”, The conditions mirror those of the SbS SH, but focus only on the domestic tax system The UPE SH only eliminates the UTPR TuT in the UPE jurisdiction. All other P2 TuT and compliance obligations remain. No countries qualify for this SH yet.

The UPE SH applies to financial years starting as of January 1, 2026.

3. SBTI SH

The Substance‑Based Tax Incentive (SBTI) SH provides a beneficial treatment of certain Qualified Tax Incentives that are expenditure- or production-based. This likely includes US R&D credits, mainly relevant for non‑US MNEs with US operations and can also be relevant for US MNEs benefitting from tax incentives in QDMTTs jurisdictions.

The SBTI SH applies to financial years starting as of January 1, 2026.

4. Simplified ETR SH

The Simplified Effective Tax Rate Safe Harbour (ETR SH) introduces a permanent SH based on a simplified ETR calculation compared to the full P2 rules. If the Simplified ETR is at least 15%, the TuT for a jurisdiction is deemed zero when elected.

The Simplified ETR SH generally applies to financial years starting as of January 1, 2027.

5. Extension of the Transitional CbCR SH

The Transitional CbCR SH (see our Snippet here for details) has been extended for one more year and can now also apply to financial year 2027.

Impact

The SbS package reshapes P2. As early as of financial year 2026, US MNEs avoid the IIR and UTPR but remain subject to QDMTTs, for which other new SHs may be applied. Non‑US MNEs will gain most from the Simplified ETR and SBTI SHs, including for their US operations. The SbS package will likely require domestic implementation, so exact timing and impact will depend on how quickly jurisdictions update their P2 rules.

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