Navigating Challenges of Transitional Safe Harbor in Tax Compliance

Taxpayers are considering using the transitional safe harbor to comply with tax regulations, initially perceived as simplifying compliance through income numbers from country-by-country reports. However, complexities have increased, making taxpayers question if it is simpler than full-globe income calculations. Implementing transitional safe harbor rules raise potential process adjustments and challenges for taxpayers. The effectiveness of incorporating these rules into domestic legislation varies among jurisdictions, with some being reactive and others needing legislative processes. Variations in legislation may arise based on jurisdictional capacity for retroactive implementation. Differences in legislative approaches and applications of rules are expected among countries initially, with a potential convergence over time as jurisdictions integrate the guidance into their laws.