The GloBE Side-by-Side System and Its Legal Implementation in the EU

On 5 January 2026, the OECD/IF published the long-expected Side-by-Side (SbS) System, effectively shielding US-parented multi-national enterprise (MNE) groups from the income inclusion rule (IIR) and the undertaxed profits rule (UTPR) by means of two new safe harbours. The SbS System’s legal implementation in the EU raises several questions under EU primary law. First, the policy choice of implementing the SbS System not by amending the Minimum Tax Directive but instead by relying on Article 32 of the Minimum Tax Directive stretches the possibilities of delegating competence to third parties possibly too far. Second, the exclusion of US-parented MNE groups from the IIR and the UTPR could create tension to the prevention of state aid under Article 107 of the Treaty on the Functioning of the European Union (TFEU). Both issues are addressed in the present article.