Corporate Tax 2026

Corporate Taxation: Navigating Tax Uncertainty in a Changing Global Landscape

Over the past year, the global tax landscape has been full of volatile and dramatic shifts. These shifts include the abrupt withdrawal of the USA from all agreements with the OECD regarding Pillar One and Pillar Two, the threat of retaliatory taxes (whether by tariffs, tax rates and other changes), the agreement between the USA and the remaining Group of Seven countries for a side-by-side exception for US multinational groups from some of the more significant portions of Pillar Two and, most recently, the OECD’s issuance of a side-by-side package (the OECD Side-by-Side Package) that adopts such a side-by-side exception (the Side-by-Side Safe Harbor) for US multinational groups. While arguably the issuance of the OECD Side-by-Side Package provides some increased stability – at least in the short term with respect to the prospect of US retaliatory taxes – its implementation, effect, and longevity are all continued areas of uncertainty and concern.

Despite this uncertainty, there is also a remarkable amount of stability in certain tax systems. For example, despite all the changes that have occurred, and that still will occur, the basic principles and rules of corporate taxation in many jurisdictions have largely remained unchanged. This is due in large part to the fact that the underlying challenges, concerns, and motivations of jurisdictions in dealing with taxation remain broadly the same (even if the specific approaches taken by jurisdictions differ). A few themes regarding this turbulent time in global tax are discussed below.

Resurgence of tax sovereignty

A key theme in President Donald Trump’s executive order withdrawing the USA from the global tax deal with the OECD was tax sovereignty – not wanting to have US tax rules being dictated by extraterritorial bodies or governments, particularly if the USA saw those rules as being discriminatory or unfair from a US perspective. This perspective involves looking not only at whether such rules are written generically, but also whether they are substantively designed to target primarily US enterprises (and their local subsidiaries). Tax sovereignty was always going to be an issue with the USA in any global tax deal, especially with the US separation of governmental powers and roles between US negotiators (in the executive branch) of a tax deal and the legislators (ie, Congress) and the difficulties of passing most legislation through Congress. However, Donald Trump’s election certainly foreclosed the already slim chance of tax legislation in the USA being brought into line with Pillar Two, intensified this tax sovereignty theme and focused the USA on protecting its multinational enterprises from the increasing implementation of Pillar Two. 

Tax sovereignty is not isolated to the USA with respect to Pillar Two but is also evident in other jurisdictions’ reaction to the Side-by-Side Package from the OECD and related US requests (eg, a push-down of the global minimum tax that the USA imposes on non-US subsidiaries, thus potentially reducing the local domestic minimum tax that can be collected by that subsidiary’s tax jurisdiction). This is a natural reaction to the Side-by-Side Package and part of the risk that the Side-by-Side Package erodes the overall implementation of Pillar Two and other coordinated global tax structures. It is also natural that this may cause a potential resurgence of tax competitiveness as US multinational groups may actually have, or are perceived as having, an advantage over non-US multinational groups now that US multinational groups may have an exemption from the administrative and economic burden of Pillar Two.   

Continued threat of retaliatory taxes

However, the issuance of the Side-by-Side Package does not end the potential for US retaliatory taxes in connection with the enactment of Pillar Two and digital services taxes. As with other OECD packages, the Side-by-Side Package requires implementation by individual jurisdictions (in particular jurisdictions that already have adopted such taxes). That takes time and there is no guarantee that most or all of the relevant jurisdictions will agree to adopt the Side-by-Side Safe Harbor. If there are deviations from the Side-by-Side Safe Harbor that are not favourable to the USA in such jurisdiction-by-jurisdiction implementation, that could further impact whether the USA contemplates enacting US retaliatory taxes. Additionally, the OECD Side-by-Side Package is not ideal in all respects from a US perspective, including that there is a stocktake in 2029 that may further impact the longevity of the Side-by-Side Safe Harbor. Thus, pending the outcome of future US elections and the stocktake, there remains significant uncertainty regarding the long-term viability of the OECD Side-by-Side Package.

Accordingly, it is still possible that the Side-by-Side Safe Harbor is not fully implemented or is only temporarily implemented, thus raising the specter of US implementation of retaliatory taxes that could further destabilise the global tax system.         

Consistent and persistent problems of tax administration and enforcement

Even though not compliant with all the specific requirements of Pillar Two, the US system has significant features targeting base erosion, profit shifting, hybrid arrangements, information gathering and sharing and other features meant to limit tax avoidance and tax evasion. These challenges permeate the entire global tax system and are present in most jurisdictions. These common, and persistent, challenges drove the very existence of base erosion and profit shifting initiatives, including the development of Pillar Two. As we see with the current state of the global tax system, the difficulty is how to address these persistent issues in a coherent and even-handed manner that also takes into account economic, political, geopolitical and other factors.

One significant issue remaining in most tax systems is complexity. For example, Pillar Two is notoriously complex. As a result, the Side-by-Side Package’s inclusion of a Simplified ETR safe harbour (to simplify the operation of the global anti-base erosion model rules and ideally relieve multinational enterprises and taxing authorities from more complex computations) made some strides in simplifying some of Pillar Two’s application, but the system nevertheless remains highly complex. This complexity is particularly difficult as countries grapple with funding for enforcement while still developing new tools (including artificial intelligence (AI)) and expertise to enforce these new rules. While some jurisdictions have already implemented portions of Pillar Two provisions for a couple of years, many are newly enacted and taxpayers in all of these jurisdictions generally are still figuring out the ramifications (positive and negative) of Pillar Two implementation. 

This challenge of complexity and tax administration is shared by the USA, which has generally reduced its funding for the Internal Revenue Service (IRS) and has greatly reduced its workforce over the past year. Some of these reductions may be mitigated by the increasing use of AI resources in tax administration and enforcement – for example, the IRS has greatly expanded its use of AI resources in audits and fraud detection. However, it remains to be seen just how effective AI will be in such a role and any such new technology and methods may have additional unforeseen challenges. 

Stability (or lack thereof) in individual jurisdictions

The USA recently enacted a new sweeping tax and spending legislation in the form of the One Big Beautiful Bill Act, and while it introduced a number of welcome changes and clarifications, the vast majority of the tax-relevant changes were extending provisions from prior legislation that were going to expire, walking back certain tax incentives for energy production and some tax provisions related to individuals. Accordingly, a significant portion of US corporate tax structure remained largely the same and the basic principles underlying US corporate taxation are essentially unchanged. Consequently, while there certainly are developments and changes that constantly occur, the US corporate tax system has remained fairly stable pending the application of Pillar Two to US multinational groups.

As readers go through this guide, they may find a similar situation in a number of jurisdictions. In other words, while there may be a significant and real feeling of chaos and uncertainty, there are pockets of stability that can provide guidance and relative comfort when evaluating investment in an unfamiliar jurisdiction.

This guide is divided by jurisdiction before being broken down further into the following sections that detail key features of each jurisdiction’s tax system:

• corporate structures, residence and tax treatment;
• corporate tax regime;
• taxation of corporations and non-corporate businesses;
• taxation of inbound investments;
• taxation of non-local corporations;
• taxation of foreign income of local corporations; 
• anti-avoidance provisions;
• audit cycles; and
• the application of BEPS.

These sections provide important background and insights into the implications of, and important considerations for the form of, investment into an unfamiliar jurisdiction. Furthermore, as users of this guide proceed on a jurisdiction-by-jurisdiction basis, they can discern key points of consistency and divergence between different jurisdictions, thus allowing for a clear comparison when contemplating where to operate or invest. 

Conclusion

What is clear on the global tax stage is that taxpayers and tax practitioners will continue to grapple with significant uncertainty about the global tax system and how non-tax factors (like global and US politics) will shape how jurisdictions approach a globally coordinated tax system. Nevertheless, this guide provides necessary information and tools to deal with such uncertainty and act with confidence when investing in and operating a cross-border enterprise.