error
Subscriptions are not available for this site while you are logged into your current account.
close
Skip to main content
Submit RFP

      In the last edition of Tax Matters Digest, we discussed the release on 5 January 2026 by the G20-OECD Inclusive Framework on BEPS, of new Administrative Guidance on a ‘Side-by-Side’ package which modifies key aspects of the Pillar Two framework.

      Since then, KPMG International has published more detailed commentary and also hosted a webcast for clients on 14 January 2026 – readers who missed this webcast can access the replay on the Future of Tax & Legal webcast series page. The OECD hosted its own webcast the day before and the replay and slides can be accessed via the OECD website. Readers employed by US-parented groups may also be interested in watching the replay of a webcast hosted by KPMG in the US.

      In a further development, on 12 January 2026, the European Commission published a notice in the Official Journal of the EU in support of the ‘Side-by-Side’ package. KPMG’s EU Tax Centre has published a Euro Tax Flash providing further information and comment on what this means for implementation in EU countries.

      In the UK, a ministerial statement issued on 7 January 2026 confirmed that amendments to UK domestic law and accompanying guidance, implementing the provisions of the ‘Side-by-Side’ package, are expected to be incorporated

      Kashif Javed
      Kashif Javed

      Partner, Head of International Tax

      KPMG in the UK

      in the 2026/27 Finance Bill. These changes are anticipated to apply with retroactive effect for accounting periods beginning on or after 1 January 2026, with ‘substantive enactment’ currently expected around February or March of 2027. Whilst a number of other countries are also taking a retroactive approach, this will not be possible in all countries. In light of this timeline, we recognise that many groups continue to experience uncertainty regarding their financial reporting obligations and early dialogue with auditors is recommended. Our International Standards Group is currently considering the impact of the ‘Side-by-Side’ package and, where applicable, further details will be included in a future edition of Tax Matters Digest.

      With the transitional Country-by-Country Reporting (CbCR) safe harbour now extended to 1 January 2027, focus has shifted to the interaction between its end date and the introduction of the permanent Effective Tax Rate (ETR) safe harbour, which may be available as early as 1 January 2026 in the UK, subject to ministerial confirmation. In scope groups will need to assess the components of the Side-by-Side package carefully to understand the implications, the associated financial reporting impacts, and how they may in practice be able to benefit from the intended simplification measures.

      Groups should also consider how their Pillar Two compliance approach may need to evolve over time as the new rules take effect, while monitoring implementation developments across all relevant jurisdictions. For example, although the removal of the ‘once out, always out’ rule is a welcome change, it introduces additional complexity, as the processes for transitioning into and out of the full Global Anti-Base Erosion (GloBE) rules will need to be clearly established.

      Please reach out to your usual KPMG contacts or the authors (who can also put you in touch with accounting colleagues for queries around financial reporting) if you have any questions on the implications of these developments for your business.

      For further information please contact:

      Something went wrong

      Oops!! Something went wrong, please try again