Cross-border Tax Talks Podcast | PILLAR TWO: HINDSIGHT IS 20/24 | Calum Dewar

Doug McHoney (PwC's Global International Tax Services Leader) and podcast regular Calum Dewar (Principal, International tax services) are at PwC’s EMEA’s International Tax, Legal, and Workforce Academy in Prague, Czech Republic, to discuss the latest happenings around Pillar Two. Doug and Calum examine the many practical issues taxpayers, governments and tax advisors are facing to implement the new rules, including disparity in financial accounting, the QDMTT safe harbour, arbitrage arrangements, GloBE reorganization rules, and allocation of deferred taxes.
Timestamps:
1:25 - How long have you been a tax practitioner and how has international tax changed over the years?
5:30 - Where are we today as Pillar Two begins to be implemented across the world?
9:00 - Diversions and variances from the original intent of Pillar Two
12:00 - Do countries understand what they are signing up for? How are different countries going to administer Pillar Two considering the complexity?
16:25 - What challenges are taxpayers seeing from the OECD’s December Administrative Guidance?
17:00 - Qualifying country-by-country reports
20:30 - Hybrid arbitrage arrangements
25:45 - What issues taxpayers should be mindful of in the Deals context?
32:15 - How applicable are the GloBE reorganization rules to common tax-free transactions?
36:20 - What are the issues around the allocation of deferred taxes?
41:10 - Any other issues taxpayers should be keeping an eye on moving forward?
44:00 - Calum’s view on what happens in 2025 when the UTPR and several DSTs come into effect.

[@TheShash270]

I initially thought if you pass any of the 3 safe harbors you should ideally should be relieved from the QDMTT as well in any shape or form, i am now trying to understand what is a QDMTT safe harbor isnt it the same? However, i am still not able to understand if lets say you pass the safe harbor but then the Q CBCR report is a US GAAP based Report (10K) then its not apples for apples because you would ideally have calculated a QDMTT based on local stat and not US GAAP?

[@DougMcHoney]

The “QDMTT safe harbor” typically refers to an IIR or UTPR jurisdiction that sets the top-up tax to zero if another country has a “qualifying” DMTT. Many of the QDMTT adopted by countries allow taxpayers to apply the “transitional safe harbors” to their QDMTTs. There are lots of apples, oranges and other fruits mixed with the bunch as a result of local stat vs. financial accounting standard of the UPE when computing the Pillar Two amounts. Keep in mind that the CbCR data for the transitional safe harbor can also be a “mixed bunch” but the CbCR report must be “qualifying” for taxpayers to rely on it.