Cross-border Tax Talks Podcast | PILLAR TWO: HOW SAFE IS THE SAFE HARBOR? | Steve Kohart

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Steve Kohart for our first podcast in PwC’s New York studio. Steve is a PwC international tax partner based in New York, and a former adviser for the OECD Center for Tax Policy and Administration. Doug and Steve discuss the OECD’s latest Pillar Two Administrative Guidance, which was published December 18, 2023 and primarily covers the transitional country by country Safe Harbor. More specifically, Doug and Steve address how jurisdictions will implement the guidance, purchase price accounting adjustments, consistent use of data, hybrid arbitrage arrangements, the allocation of CFC taxes, and whether the OECD will provide additional guidance in 2024.
Timestamps:
1:25 - How was your holiday break?
2:10 - Back to work! What is the general scope of the December 2023 OECD Administrative Guidance?
4:22 - Will countries actually be able to incorporate this guidance into domestic legislation?
6:50 - What did the guidance provide on purchase price accounting adjustments, including for goodwill impairment.
9:22 - Let’s talk about the consistent use of data for:
Constituent Entities
Permanent establishments
Financial statements
Transfer pricing adjustments, and so forth.
15:50 - Looking at other issues outside of the consistent use of data, let’s discuss:
Guidance on intergroup payments
Simplified covered taxes
Permanent establishments
Routine profits test
Consolidated revenue threshold
20:30 - The guidance addressed some mechanical questions around mismatches of fiscal years
21:30 - Guidance on non material Constituent Entities
22:28 - Discussion of hybrid arbitrage arrangements - what it is, why the OECD was concerned, etc.
25:27 - Cut off dates
27:24 - Deduction / Non Inclusion
28:17 - Duplicate loss arrangements
30:26 - Duplicate tax recognition arrangements
31:59 - Traps for the unwary as taxpayers are thinking about adjustments for the transitional safe harbor
36:11 - How does the allocation of CFC tax rules work?
41:20 - Will we see more guidance from the OECD in 2024? How will implementing jurisdictions address retroactivity?
43:04 - Any general advice for multinational companies?
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