The Global Minimum Tax (GMT), also known as Pillar Two, are internationally agreed tax rules that, broadly, were designed to ensure very large businesses are taxed on their profits at a minimum effective tax rate of at least 15% in all jurisdictions in which they operate.

Whilst a number of countries, including the UK, have implemented these rules, President Trump has been vocal about his dislike of what he considers to be ‘extra-territorial’ taxes, which includes digital services tax (DST), as well as the GMT. This was reflected in the draft One Big Beautiful Bill Act (OBBBA), which included provisions that may have resulted in businesses owned by residents of countries with ‘extra-territorial’ taxes to be subject to an additional US tax.

The G7 has now announced that in return for dropping these provisions from the OBBBA, US parented groups will be exempt from certain aspects of the GMT rules.

Whilst this agreement has been welcomed by many, there is still significant uncertainty for affected businesses.

Although the US has committed to removing the relevant provisions from the OBBBA, it remains to be seen what exactly the final Act will look like. It is also unclear how governments in countries outside the G7 will react to this announcement. This agreement may trigger countries committed to implementing the GMT rules to ask why US parented businesses should be treated differently. Additionally, other countries that have not implemented the rules may seek similar treatment.

It remains to be seen exactly how the exemption will be implemented in practice. As it currently stands, US parented groups are not expected to completely escape the UK’s Pillar Two rules, as UK entities within the group are still expected to be subject to the Domestic Top-up Tax aspect of the rules.

The uncertainty in the international tax environment also extends to other taxes. The Canadian government has announced that it will repeal its DST to advance broader trade negotiations with the US. The UK government may come under similar pressure in respect of its own DST (introduced in 2020), in order to build on the tariff deal it agreed earlier this year with the US.

With so much still up in the air, affected groups and their advisors will be following developments with interest in order to prepare for potential changes, as the devil will be in the detail and readiness is key.