Cross-border Tax Talks Pillar Two Hybrid Arbitrage: stormy waters ahead?
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Aug 21, 2025 Raza Janjua, a Director at PwC’s NYC ITS practice and an authority on hybrid arbitrage, dives into the intricate world of international tax transformations. He dissects the origins of BEPS Action 2 and how it paved the way for complex hybrid arbitrage rules. The conversation uncovers real-life pitfalls, from preferred equity classifications to cross-border compliance challenges. Raza also speculates on future guidance from the G7 and its implications for U.S. tax laws, emphasizing the necessity for clearer frameworks in an evolving landscape.
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Career Pivot To International Tax
- Raza described his path from Pakistan to US college then into PwC international tax practice.
- He switched from real estate to international tax after seeking the International Tax Academy opportunity.
BEPS Action 2 Laid The Groundwork
- BEPS Action 2 targeted hybrid mismatches and produced the Hybrid Mismatch Report.
- That work led later to branch mismatch guidance and national implementation efforts like ATAD-2.
ATAD-2 And U.S. Parallels
- ATAD-2 required EU jurisdictions to implement hybrid mismatch rules by January 2020.
- The U.S. enacted analogous anti-hybrid provisions in TCJA such as Section 267A and participation exemption rules.