Cross-border Tax Talks
Pillar Two Safe Harbors: The CbCR journey
Nov 15, 2023
Doug McHoney and David Ernick discuss the transitional safe harbor rules for Country-by-country reporting (CbCR) in this podcast. They cover topics such as the safe harbor tests, exclusions, and differences between safe harbor and full GLoBE rules. They also discuss the history and implementation of public CBCR, challenges of transfer pricing adjustments, and the importance of Advance Pricing Agreements (APAs).
41:42
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Quick takeaways
- The safe harbor rules for Pillar 2 in country-by-country reporting simplify top-up tax liability determination, easing the compliance burden for taxpayers.
- The introduction of public country-by-country reporting increases the need for reliable and compliant data to avoid reputational risks and potential scrutiny.
Deep dives
The importance of Pillar 2 safe harbor in country-by-country reporting
The safe harbor rules for Pillar 2 in country-by-country reporting provide a simplified approach for determining top-up tax liability. The safe harbor consists of three main prongs: de minimis exception, effective tax rate test, and the substance-based income exclusion rule. These rules aim to ease the compliance burden and provide a more straightforward calculation for taxpayers. However, challenges such as transfer pricing adjustments and the timing of country-by-country reporting still need to be addressed to ensure the accuracy and eligibility for the safe harbor.
