Trump advocates for the minimum tax legislation
The implementation of a global minimum tax on US companies has taken an unexpected turn due to recent developments involving former President Donald Trump and the G7's latest agreement.
On his second day in office, Trump announced that the US would explore protective measures against what he called “Discriminatory and Extraterritorial Tax” mechanisms that would disadvantage US companies abroad. This led to the introduction of Section 899 of the Internal Revenue Code (IRC), known as the "One Big Beautiful Bill Act" (OBBBA), which aimed to impose reciprocal taxes on foreign companies in countries compliant with the global minimum tax rules.
However, the global minimum tax, often called Pillar Two, was developed by the Organisation for Economic Co-operation and Development (OECD) and requires multinational enterprises (MNEs) with revenues exceeding €750 million to pay at least a 15% minimum tax on profits per jurisdiction. Many countries, including EU members, have implemented this tax starting from fiscal years after December 31, 2023.
After Trump’s return to office, the US used the threat of the so-called "revenge tax" (Section 899 IRC) to negotiate with the G7. This pressure led to a major concession: On June 28, 2025, the G7 announced that the US would refrain from implementing Section 899 IRC in exchange for US multinationals being exempted from the global minimum tax rules, specifically the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).
The agreement specifies a “side-by-side system” whereby the US tax system and Pillar Two rules operate in parallel, effectively providing US MNEs with a full exclusion from the key global minimum tax rules like the IIR and UTPR. This exemption includes profits in intermediate holding jurisdictions and those of other entities within the MNE group structure.
While the global minimum tax framework remains in place internationally and in various jurisdictions, US MNEs benefit from this carve-out, reflecting both a strategic US negotiation stance led initially by Trump and formalized by the 2025 G7 deal.
It is important to note that the promise of the G7 to drop the global minimum tax on US companies remains unclear in terms of implementation. Additionally, it is clear that the G7 is not the partner involved in the deal regarding the global minimum tax for US companies.
In a significant deviation from the global consensus and a marked shift in how the US approaches global minimum taxation on its companies, US multinationals are currently exempt from the 15% global minimum tax imposed by Pillar Two. The US Omnibus Bill, known as the One Big Beautiful Bill Act, has removed all legal hurdles for the retaliation tax, but the US has chosen not to impose additional taxes of up to 20% on companies and investors from countries with "unfair taxes".
This news is fortunate for European countries, as it means their companies will not face the potential burden of the retaliation tax. However, the implications of this exemption for global tax fairness and the future of the global minimum tax remain to be seen.
In light of the 2025 G7 deal, the US has successfully negotiated an exemption for US multinationals from the 15% global minimum tax imposed by Pillar Two, leaving these companies free from this particular obligation. Meanwhile, the global minimum tax framework persists, with its impact on global tax fairness and the future of the tax remaining uncertain.
