The OECD's Side-by-Side Package Has Quietly Rewritten Pillar Two

The OECD's Side-by-Side package, reportedly agreed by the Inclusive Framework in January 2026, has been described as extending transitional relief for US multinational enterprises under Pillar Two. Most coverage has framed this as a technical accommodation. Available analysis suggests it may have broader implications, particularly for family structures with US-connected entities.

What the Side-by-Side Package Reportedly Changed

Available information indicates that the January 2026 statement from the OECD Inclusive Framework addresses how US parented groups interact with GILTI and the broader US international tax architecture relative to the UTPR and IIR mechanisms applied to non-US multinationals. The framework is generally characterised as a coexistence arrangement rather than a carve-out, with coordination rules intended to avoid double taxation.

The practical effect, in broad terms, is that US multinationals retain access to their existing foreign tax credit architecture and GILTI computation, while non-US groups continue to face the Pillar Two regime. For families, the implications cut in two directions at once.

Why This Matters for Families

The corporate tax press has focused on the implications for listed multinationals. The family dimension has received less attention. Private family structures — particularly those with US-connected principals, trusts, or holding vehicles — are exposed to Pillar Two in ways that may be less well understood than the coverage suggests.

For families with US-connected entities in their structure — a US grantor trust, a US-resident beneficiary, a US parent in a commercial subsidiary, or a US taxable principal — the Side-by-Side package potentially changes several things at once.

First, the interaction between GILTI and foreign Pillar Two top-up taxes appears to have been clarified in ways that may affect planning considerations. Second, the timeline for UTPR application has reportedly shifted further out. Third, substance requirements that determine whether a structure is exposed to top-up tax remain a central consideration, and arguably have become more important where transitional relief applies.

How the Major Jurisdictions Are Responding

The major jurisdictions where Ladd & Co. operates have responded to Pillar Two in materially different ways, and these differences arguably matter more in light of the Side-by-Side developments.

Switzerland has implemented the IIR and its own Qualified Domestic Minimum Top-Up Tax (QDMTT). The Swiss approach is generally understood to be designed to capture top-up tax revenue domestically rather than ceding it to other jurisdictions. Families with Swiss holding structures and US-connected principals should seek professional advice on how the Swiss QDMTT interacts with GILTI in their specific circumstances.

The United Kingdom implemented the Multinational Top-up Tax and Domestic Top-up Tax with effect from accounting periods beginning on or after 31 December 2023. HMRC's technical guidance should be consulted directly for the current position.

Singapore has taken a distinctive path. The Ministry of Finance introduced a Domestic Top-Up Tax applicable to in-scope multinational groups. For family offices under Singapore's incentive schemes, the interaction with broader group thresholds and US-connected principals is a matter requiring specific professional analysis.

The UAE has introduced a DMTT alongside its federal corporate tax regime. For families using DIFC or ADGM structures, the layered compliance environment warrants specific local advice.

Why the GILTI Interaction Warrants Attention

The Side-by-Side package's most consequential feature for families, in our view, is the clarified interaction between GILTI and foreign top-up taxes. Prior to January, there was genuine uncertainty about whether a US taxable principal with interests in a Swiss holding company subject to QDMTT would face effective double taxation or whether foreign tax credits would apply cleanly.

The January 2026 statement appears to have addressed many of these questions, though specific outcomes will depend on individual facts and circumstances. Families considering the planning implications should seek tailored professional advice rather than rely on general commentary.

What a Considered Response Might Involve

Families reviewing their position in light of the Side-by-Side package may wish to consider three areas. First, substance requirements in every jurisdiction where they hold operational entities, not just their primary domicile. Second, the interaction between US-connected principals' tax position and the top-up tax liability of their broader structure. Third, holding company location decisions that had been deferred pending Pillar Two clarity.

The question for any family with US-connected structures is not whether the Side-by-Side package changes their position. The question is whether their current adviser has absorbed what the January statement actually said. This article does not constitute tax, legal or financial advice; specific decisions should be taken only with appropriately qualified professional input.

Frequently Asked Questions

—Does the Side-by-Side package mean US-connected families are now exempt from Pillar Two?

No. The package is generally understood to coordinate GILTI with the Pillar Two regime for US parented groups, but non-US entities within a family's broader structure remain subject to Pillar Two rules in their respective jurisdictions. The [OECD Inclusive Framework](https://www.oecd.org/tax/beps/) materials should be consulted for the current position.

—How long does the Side-by-Side transitional relief last?

Available reporting indicates the package extends transitional relief for US MNEs until at least 2027, with a review point at that stage. Further extensions are possible but not guaranteed.

—Which jurisdictions matter most for families with cross-border structures?

Switzerland, the UK, Singapore, the UAE, and Hong Kong have all implemented domestic top-up taxes in recent periods. The Cayman Islands relies on its economic substance regime rather than a domestic top-up tax, meaning Cayman structures may face top-up tax exposure through other jurisdictions in the group rather than domestically.

—What should families review in their existing structures?

Three areas commonly highlighted: substance requirements in each operational jurisdiction, the interaction between US-connected principals' GILTI position and the family's broader top-up tax liability, and the effective tax rate calculation across the full group. Any review should be undertaken with qualified tax counsel.

The window for straightforward restructuring appears to have narrowed at each review point. Families considering their position should engage qualified advisers on the specifics of their own structure.