For decades, international tax planning often began with a familiar question: Where can a company place income, assets, or intellectual property at the lowest cost? That question is becoming less useful.
Governments are introducing minimum taxes, sharing more information, and drawing tax reporting closer to individual transactions. At the same time, tariffs, remote work, and changing supply chains are creating tax exposure in places companies may not expect.
Future planning will depend less on finding one favorable jurisdiction and more on understanding how several tax systems interact.
A Lower Tax Rate No Longer Tells the Whole Story
The clearest sign of this shift is the OECD Pillar Two framework. It generally applies a 15% minimum effective tax rate to multinational groups with consolidated annual revenue above €750 million. According to EY, many countries began applying the rules in 2024, and dozens required their first filings by June 30, 2026.
Pillar Two evaluates effective tax rates separately by jurisdiction. A company operating in a country with a statutory rate above 15% may still face additional tax if credits, exemptions, or accounting differences pull its calculated rate below the minimum. That makes the design of incentives just as important as their advertised value.
“The headline rate may attract attention, but it no longer gives decision-makers enough information,” John Martinkat explains. “Companies need to know how an incentive affects their effective rate, what activity it requires, and how it interacts with every other tax regime in the group.”
The January 2026 side-by-side agreement gave qualifying U.S.-parented groups relief from Pillar Two’s Income Inclusion Rule and Undertaxed Profits Rule. According to the U.S. Treasury, the agreement involved more than 145 countries. It does not, however, remove every local obligation. Foreign subsidiaries may still face domestic minimum taxes, registrations, and reporting requirements where they operate.
U.S. Tax Reform Is Reshaping Cross-Border Decisions
The 2025 federal tax law also changed how U.S. multinationals assess foreign earnings, exports, research, and related-party payments. Beginning in 2026, GILTI became net CFC-tested income, or NCTI. The Section 250 deduction fell to 40%, producing a 12.6% rate before foreign tax credits and an approximate 14% crossover rate.
FDII was renamed foreign-derived deduction eligible income, or FDDEI. Its 33.34% deduction produces an effective federal rate of roughly 14% on qualifying income. The BEAT rate, which applies to certain payments to foreign affiliates, remained at 10.5% rather than increasing to 12.5% as previously scheduled.
Research location now carries greater weight as well. Domestic research expenditures incurred in tax years beginning after December 31, 2024, may qualify for immediate deduction. Foreign research remains subject to capitalization and 15-year amortization. This difference may influence where businesses place research teams, software development, and intellectual property, but tax treatment cannot be the only factor. Talent, infrastructure, legal protection, and operating costs still shape the commercial result.
Large groups must also consider the corporate alternative minimum tax. It imposes a 15% tax on adjusted financial statement income and generally applies to corporations averaging more than $1 billion in annual financial statement income. This system uses financial statement measures rather than the regular taxable-income calculation. A deduction that lowers ordinary income may therefore produce a smaller overall benefit than expected.
Strong Planning Depends on Substance and Reliable Data
Transfer pricing remains one of the main points of cross-border tax risk. Minimum taxes have not settled questions about where profit belongs, particularly when related companies share intellectual property, services, financing, or supply-chain responsibilities.
Companies need agreements that match what their employees and entities do. If the entity named as the owner of valuable intellectual property lacks the people, authority, or resources to manage it, tax authorities may challenge the allocation of income.
“A structure should make sense when someone looks past the legal documents,” John Martinkat says. “The contracts, employees, decisions, financial records, and tax filings should tell the same story.”
Some businesses seek advance pricing agreements to reduce uncertainty. The IRS completed 110 such agreements in 2025, but 622 remained pending at year-end. The median completion time reached 41.6 months, according to the agency’s 2025 APMA report. These figures show both the demand for certainty and the need to begin the process well before a major transaction or restructuring.
Reporting systems are also becoming part of the planning process. Deloitte reports that electronic invoicing and reporting requirements now cover more than 80 countries. In these systems, authorities may receive transaction data before a business files its periodic return. Errors in customer classification, product coding, or tax treatment can surface immediately.
AI can help teams review contracts, monitor rule changes, test effective-rate scenarios, and identify unusual transactions. Yet its value depends on the information it receives. Deloitte found that 45% of surveyed tax leaders considered AI-related skills their greatest need for the next two years, while 94% expected those skills to become essential within four to five years. The findings point toward tax functions that combine technical judgment with stronger data capabilities.
Tax Planning Is Becoming a Business-Wide Discipline
Cross-border decisions now connect tax with trade, finance, workforce management, and technology. Moving production can change customs duties, transfer prices, incentives, and minimum-tax calculations. Allowing an employee to work from another country may create payroll obligations or a taxable business presence. An acquisition can bring historical liabilities, weak reporting systems, or new Pillar Two exposure.
For that reason, tax teams need earlier involvement in commercial decisions. Reviewing a structure after contracts are signed or employees have moved leaves fewer options. Forward-looking planning starts while the business is still comparing locations, financing arrangements, operating models, and transaction terms.
Final Thoughts
International tax planning will remain valuable, but its strongest results will come from structures that can withstand changes in law, scrutiny, and business conditions. The companies that treat tax as part of operational design will be better placed to make cross-border decisions with confidence.
