US and EU: Different Tax Rules in the Same Global Game
For companies operating on a global scale, the question is no longer just “where can I pay less tax?” The real question is,
“In which country and how can I structure my company to achieve lasting tax advantages without falling foul of global minimum tax rules?”
The US has not fully integrated the OECD’s 15% Pillar Two regime into its domestic law. Nevertheless, thanks to unique minimum tax rules such as GILTI, BEAT, CAMT, it stands not outside the game but right at its center. The EU, on the other hand, is implementing a much stricter framework by introducing a country-by-country 15% effective tax requirement rather than a group-based one through the Minimum Tax Directive.
This scenario can lead to the conclusion that a US-based group can achieve a lower effective tax rate compared to an EU-based group for the same global profit. This necessitates fundamental strategic changes in company formation, holding center selection, R&D location, and factory investments.
1. Problem Definition: How Has Company Formation Strategy Changed in the Era of Global Minimum Tax?
With the OECD’s Pillar Two framework, the era of “near-zero tax” for large groups has ended.
What is now critical is the ability to combine tax incentives with real economic activity.
Two main tensions arise here:
- US model: Implements its own minimum tax regime with GILTI/BEAT/CAMT, but largely retains domestic incentives. After the OBBBA (One Big Beautiful Bill Act), there are tremendous advantages for R&D and investment expenditures within the US.
- EU model: Introduces a strict 15% minimum tax based on jurisdictional blending with Pillar Two. The incentives provided by member states can largely be neutralized through UTPR and top-up tax mechanisms.
As a result, for two groups with the same business model:
- A US-based holding can gain a net advantage from incentives, while
- An EU-based holding may not be able to reduce its effective tax burden below 15% even with similar incentives.
2. US: Tax Advantageous Company Formation and Restructuring Strategies
2.1. Why is the US in the “minimum tax game” without formal Pillar Two?
The US has not directly integrated the OECD’s 15% global minimum tax regime into its domestic law. Instead:
- GILTI (Global Intangible Low-Taxed Income): Targets CFC profits in low-tax jurisdictions for US parent companies.
- BEAT (Base Erosion and Anti-Abuse Tax): Specifically targets structures that erode the tax base through intra-group payments.
- CAMT (Corporate Alternative Minimum Tax): Introduces an alternative minimum tax rate for large companies.
At the G7 level, a political consensus has emerged to exempt US companies from the classic 15% Pillar Two regime by the summer of 2025.
The rationale is clear: The US is already operating its own minimum tax rules with GILTI/BEAT/CAMT.
In the EU, however, jurisdictional blending (calculating effective rates on a country basis) is valid. The GILTI in the US operates on a global blending basis; that is, a low-tax country can be more than balanced by a high-tax one. This structural difference strengthens the US’s hand in tax competition.
2.2. OBBBA and Domestic Incentives: A Golden Era for R&D and Investment Heavy Models
The One Big Beautiful Bill Act (OBBBA), accepted in 2025, offers three critical incentives that make the US a renewed center for investment and R&D:
- Immediate expensing of R&D (IRC §§174 and 174A): From 2025 onwards, R&D expenditures within the US can be fully deducted. R&D outside the US must be capitalized and amortized. This effectively pulls R&D to the US.
- 100% Bonus Depreciation (qualified property): The opportunity for 100% depreciation in the first year for qualified tangible assets acquired after January 19, 2025 has returned. The effective tax burden for factory, machinery, and facility investments dramatically decreases.
- Interest expense limitation – Section 163(j): From 2025 onwards, the interest expense limitation returns to 30% EBITDA basis. This makes financing through borrowing attractive again; however, it is already known that additional restrictions will come from 2026 onwards.
In this context, the critical strategic question is:
“Should I establish a factory in the US or a software company?”
The answer is usually “both, but with the right setup”:
- Capex-heavy model (manufacturing, factory, logistics): Thanks to 100% bonus depreciation, a massive tax shield forms in the first year. Establishing a real production, warehouse, or distribution center within the US allows you to benefit from both incentives and commercial logistics.
- R&D-heavy model (software, biotech, deeptech): With immediate expensing of R&D, R&D expenditures quickly become deductible. Positioning the R&D team in the US becomes the focus of tax planning after OBBBA.
You cannot benefit from these incentives with a “Delaware LLC” set up solely on paper.
OBBBA serves as an anchor that attracts tangible economic activities to the US.
2.3. Should I establish a Delaware LLC or engage in real activities in the US?
States like Delaware, Nevada, and Wyoming still offer:
- Relatively low/medium corporate income tax,
- Advanced corporate law,
- Privacy and flexibility
However, the equation has changed after OBBBA:
- Is R&D genuinely conducted in the US?
- Where are tangible assets like machinery, factories, and data centers located?
- Where do the employment and wages belong within the US?
Structures that cannot provide consistent answers to these questions with actual activities lose their meaning in terms of tax incentives.
Substance (real assets, employees, and functions) is now mandatory.
2.4. GILTI, CFC, FTC and US-based Holding Strategies
OBBBA also includes changes that directly affect US groups in international taxation:
- The GILTI mechanism is being simplified; the Transitional Intangible Regime is being removed, and the GILTI deduction rate is permanently fixed at 40%. This can raise the effective GILTI rate, especially for subsidiaries in low-tax countries.
- CFC rules and foreign tax credit (FTC) mechanisms are being updated; determining how much tax was paid in which countries and how much will be credited in the US requires more precise modeling.
Therefore:
“Is a US-based holding or a European-based holding more logical?” The answer is no longer given solely based on nominal tax rates.
Under a US-based holding:
- Profits from subsidiaries in low-tax countries may be subject to tax at the US level due to GILTI and FTC restrictions.
- On the other hand, thanks to R&D and factory investments within the US, the global effective tax rate (ETR) can be significantly optimized.
At this point, it becomes critical to test the group structure, subsidiary countries, profit distribution, and licensing/royalty flows with GILTI and FTC simulations. Conducting such simulations with an international tax team that reads US and EU legislation together is the healthiest approach.
3. EU: 15% Minimum Tax, UTPR, and Competitive Pressure
3.1. Minimum Tax Directive and UTPR: Why is the EU Stricter?
The EU, by implementing the Minimum Tax Directive and incorporating the 2021 global tax agreement (Pillar Two) into domestic law, has imposed a requirement on multinational companies for a minimum effective tax rate of at least 15% in each EU country.
The strongest tool here is: UTPR (Under-Taxed Profits Rule).
- If the effective tax rate for a group in another country is below 15% for a specific year, an EU member can collect a top-up tax for that difference.
- This can target not only classic tax havens but also structures in “medium tax” countries that receive aggressive incentives.
For US-based companies, due to the nominal rate of 21% in the US, there is a safe harbor regarding UTPR until 2026.
Whether this safe harbor will be extended remains an important negotiation topic in EU-US relations.
3.2. Structural Differences and Consequences Between EU and US Minimum Tax Regimes
Wolters Kluwer and other analyses show that there are three key differences between the minimum tax regimes of the US and the EU:
- Minimum rate: The GILTI rate is roughly 10.5% until the end of 2025; afterwards, it will be around 14%. In the EU, however, there is a requirement for a minimum ETR of at least 15% on a country basis.
- Calculation method: The US GILTI system is based on global blending; a low-tax country can be balanced out by high-tax countries. The EU tests each country separately with jurisdictional blending.
- Impact of incentives: Domestic tax incentives in the US can largely be excluded in CAMT ETR calculations, providing a real advantage. In the EU, if an incentive provided by a member state reduces a company’s ETR below 15%, another member state can nullify this advantage with a top-up tax.
Therefore:
- US companies can generate net benefits from domestic R&D and investment incentives.
- In the EU, the scope for tax competition is narrowing; the lasting effects of national incentives are being restricted.
3.3. The “Corporate Tax 2.0” Debate: Can the EU Change Its Own Rules of the Game?
Within the EU, especially due to competitive pressure and the US’s aggressive incentive regime, a new tax vision is being discussed under the title “European Corporate Tax 2.0.”
Wolters Kluwer’s analyses suggest that this vision could focus on three goals:
- Preventing EU companies from paying systematically higher ETRs than their US competitors,
- Developing more competitive incentives in R&D, green transition, and strategic sectors,
- Revising minimum tax rules in a way that does not penalize companies receiving incentives.
In the short term, the picture is clear:
When establishing a company within the EU, one must consider not only the nominal tax rate but also the group-based effects of Pillar Two.
For example, a company established in a country with a low tax rate may face a higher-than-expected ETR due to UTPR/top-up pressure at the group level.
4. What Profile Should You Use to Establish a Company, Where, and How?
4.1. Tech Startups, SaaS, or R&D-Focused Companies
US-Focused Strategy:
- For technology startups looking to enter the US market, work with VC funds, and target an exit, the combination of Delaware C-Corp + US-based R&D center remains the strongest model.
- Thanks to OBBBA:
- R&D expenditures within the US can be expensed immediately,
- 100% bonus depreciation can be utilized on the Capex side,
- If necessary, profits can be lowered through borrowing under Section 163(j).
EU-Focused Strategy:
- If you want to be close to the EU market, it is critical to position the R&D center in a country with high incentives but compliant with Pillar Two (for example, one that provides certain IP box and R&D super deductions but does not reduce the group ETR below 15%).
- If the size of the group, number of employees, and revenue level exceed the Pillar Two threshold, you must model the tax advantage not just through a single country but across the entire group structure.
4.2. Manufacturing, Logistics, and Capex-Heavy Business Models
Should I establish a factory in the US?
- After OBBBA, groups that establish a real production facility in the US obtain significant tax shields in the initial years through 100% bonus depreciation.
- With a combination of sales within the US + exports, you can access the US market directly and integrate the supply chain into the EU and other markets.
Should I establish production in the EU?
- Production in the EU is still very valuable due to customs union, single market, and logistics advantages. However, in tax planning:
- Country-based 15% minimum tax,
- Energy costs,
- Regulations like the EU Green Deal and CBAM
should be evaluated together.
- For example, while some EU countries offer very attractive subsidies for green production investments, tax advantages may be limited by Pillar Two.
4.3. Holding and IP Structures: US-Based or EU-Based?
The main question in holding and IP (intellectual property) structures is:
“Where should the group’s low-tax subsidiaries be linked?”
- US-Based Holding:
- Due to GILTI and FTC rules, profits from low-tax subsidiaries can be taxed at the US level.
- However, domestic R&D and IP incentives (for example, certain FDII-like mechanisms) can reduce the global ETR.
- EU-Based Holding:
- The EU’s Minimum Tax Directive, especially for large groups, limits the advantage of low-tax subsidiaries with UTPR.
- However, a well-structured IP box + substance combination still allows for reasonable effective rates within the EU.
There is no single correct model here. What is important is to design the group structure with an international tax and legal team that can read US and EU rules together and monitor the regulations that are updated annually.
5. Operational Dimension: Personnel, Payroll, and Posted Worker Effects
When designing a tax-advantageous company structure, looking only at nominal rates and incentives would be a serious mistake.
International employment, payroll, and posted worker rules also directly affect the overall tax burden.
- If you are sending long-term personnel to the US or EU, there may be a risk of “permanent establishment (PE)” in that country. This means unexpected corporate tax burdens.
- Payroll costs (social security, employer contributions, wage taxes) are often larger than corporate taxes.
- When the right structure is established with the posted worker model, both payroll costs and tax burdens can be optimized.
Therefore, saying “I established a company in the US, I opened a holding in the EU” alone is not a strategy.
The real picture emerges from evaluating the company structure + location of employees + payroll setup + tax treaties together.
6. How Can Corpenza Assist You in This Equation?
Establishing a tax-advantageous company in the US and EU is no longer just about answering the question “which country has a lower rate?”
It requires establishing an integrated architecture in technical areas such as GILTI, CAMT, Pillar Two, UTPR, FTC, posted worker, payroll.
As Corpenza:
- We design company formation, tax number, banking, and accounting processes in the US, considering the incentives after OBBBA.
- In the EU, we plan the establishment of holding, operations, and IP companies in accordance with the Minimum Tax Directive and local legislation.
- With payroll, EOR (Employer of Record), posted worker and payroll optimization, we establish employment models with the right status in the right country.
- We design investment residency permits, golden visas, and investment citizenship programs as a cohesive whole in line with the company structure.
Thus, we help you establish an international structure that takes into account not only today but also the tax, migration, and trade trends of the next 5-10 years.
7. Conclusion: Tax Advantage is Now Won Through Design
Tax competition between the US and EU has reached a new level. While the US is transforming into a center for R&D and investment with OBBBA and its own minimum tax regimes, the EU offers a more rule-based but predictable framework with a 15% minimum tax and UTPR.
As an entrepreneur or multinational group manager today, you need to clearly answer the following questions:
- Where will my holding center be, and how will this interact with GILTI/Pillar Two?
- In which countries should I position my R&D and factory investments to benefit from incentives and avoid minimum tax?
- On which company will I employ my international personnel, and with which payroll/EOR model?
The answers you provide to these questions will determine your global effective tax rate level, profitability, and valuation among investors in the coming years.
Disclaimer
The information contained in this article is for general informational purposes only; it does not constitute legal, tax, or financial advice.
Tax legislation and international regulations change frequently; the regulations summarized here provide a general overview of the applicable framework as of the relevant dates.
Before making decisions regarding investment, incorporation, or tax planning, you should check the current official legislation in the countries where you will operate and seek individual advice from a qualified professional.
