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.
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Begin Pillar 2 Calculations Early
- Start early on year-end Pillar 2 calculations, especially for full globe calculations.
- Gathering required data and obtaining stakeholder and auditor approvals takes significant time and effort.
CBCR Safe Harbor and Data Reliability
- The transitional safe harbor based on CBCR offers simplification, but data reliability remains key.
- Engaging auditors early is crucial due to potential concerns about CBCR data quality for full globe calculations.
Data Readiness and Stakeholder Engagement
- Secure a reliable data source for full Pillar 2 calculations, including payroll data for substance-based carve-outs.
- Engage stakeholders outside tax and accounting to gather data from multiple systems and determine Pillar 2 attributes.