Cross-border Tax Talks

Pillar Two Update: Traps for the unwary

Oct 23, 2024

Steve Kohart, an International Tax Partner at PwC and former OECD advisor, shares valuable insights into the complexities of Pillar Two in international taxation. He discusses the Qualified Domestic Minimum Top-Up Tax (QDMTT) and the global implications for multinationals, particularly in Puerto Rico. The conversation delves into challenges around year-end compliance and data readiness, as well as pitfalls like hybrid arbitrage and financial statement finalization. Kohart also clarifies the concept of a 'good' credit under these new regulations.

43:00

Episode guests

Steve Kohart

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Episode notes

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Quick takeaways

Pillar Two aims to harmonize global tax standards through a minimum 15% tax rate, impacting compliance obligations for multinational companies.

Countries must align local regulations with the Undertaxed Profits Rule to avoid repercussions, stressing the importance of data accuracy and tax strategy.

Deep dives

Understanding Pillar 2 Framework

Pillar 2, developed by the OECD, aims to create a global minimum tax on corporations by imposing a minimum tax rate of 15% based on a jurisdiction's financial accounting results. This approach necessitates complex calculations that involve various adjustments to assess tax liability accurately at the jurisdictional level. Countries can implement the Qualified Domestic Minimum Top-Up Tax (QDMTT) or adopt Income Inclusion Rules (IR) to collect this tax effectively. The system's architecture allows companies to comply with local tax regulations while also addressing the requirements of the broader international tax landscape.

Intro

2min

Baseball and Global Taxation: Pillar Two Explained

6min

Exploring Qualified Domestic Minimum Top-Up Tax in Puerto Rico

3min

Navigating Multinational Compliance: Pillar 2 Insights

8min

Navigating Country-by-Country Reporting Challenges

10min

Navigating OECD Tax Guidance and Incentives

10min

Navigating Compliance in International Taxation

3min

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by returning guest Steve Kohart, an International Tax Partner in PwC’s New York City office and former advisor to the Center for Tax Policy Administration for the OECD. They dive into Pillar Two with a refresher of the Qualified Domestic Minimum Top-up Tax (QDMTT), the Income Inclusion Rule (IIR), the Under Tax Profit Rule (UTPR), as well as the status of Pillar Two enaction across the globe, including in Puerto Rico. They also talk through how companies are approaching year-end, data readiness and tax compliance; Belgium’s registration process; and several traps for the unwary, including the post-finalization of consolidated financial statements, purchase price accounting, hybrid arbitrage, and country-by-country safe harbor requirements. Finally, they discuss what makes a ‘good’ credit for Pillar Two, the US R&D credit, the reverse consensus process for qualifying a QDMTT, permanent safe harbors, and what guidance to expect next.

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Cross-border Tax Talks

Pillar Two Update: Traps for the unwary

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Understanding Pillar 2 Framework

Progress and Implementation Challenges

Compliance and Data Readiness

Incentives and Future Developments

Remember Everything You Learn from Podcasts