The Group of Seven (G7) nations have agreed to a new framework that exempts US-based multinational corporations (MNCs) from key provisions of the global minimum tax agreement. The decision introduces a “side-by-side” system that allows US firms to be taxed only within the United States on both their domestic and foreign profits, avoiding additional taxes abroad.
This announcement, made by Canada, which holds the G7 presidency, aims to provide greater certainty and stability in the global tax system. The move follows a key shift in US tax policy, particularly after the Trump administration’s decision to withdraw the US from the 2021 global tax deal brokered by the Organisation for Economic Co-operation and Development (OECD). One of the more controversial elements of that deal, section 899 of Trump’s tax bill, proposed retaliatory taxes on foreign companies operating in the US. This provision was dropped as part of the new arrangement.
Under the revised framework, the United States’ existing tax laws, including its domestic minimum tax, are recognized. This means US firms will be exempt from the OECD’s income inclusion rule (IIR) and undertaxed profits rule (UTPR), both of which are central components of the global tax pact.
The US Treasury Department has welcomed the new “side-by-side” approach, noting that it preserves the gains made by jurisdictions that are part of the inclusive framework. The department expressed a desire to continue refining this solution through further discussions.
The new agreement is still subject to further deliberation at the OECD level, where final decisions will be made on how these exemptions will be formally recognized under the broader global tax regime.
While the move provides clarity for US firms, it has drawn mixed reactions globally. Supporters argue it will reduce tax complexity for US-based companies, while critics point out that it could undermine the fairness of the global tax system by offering preferential treatment to one country’s multinational corporations.
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