Cross-Border Taxt Talks Podcast | PILLAR TWO UPDATE: TRAPS FOR THE UNWARY | Steve Kohart

Pillar Two Update: Traps for the unwary Doug McHoney (PwC’s International Tax Services Global Leader) is joined by returning guest Steve Kohart, an International Tax Partner in PwC’s New York City office and former advisor to the Center for Tax Policy Administration for the OECD. They dive into Pillar Two with a refresher of the Qualified Domestic Minimum Top-up Tax (QDMTT), the Income Inclusion Rule (IIR), the Under Tax Profit Rule (UTPR), as well as the status of Pillar Two enaction across the globe, including in Puerto Rico. They also talk through how companies are approaching year-end, data readiness and tax compliance; Belgium’s registration process; and several traps for the unwary, including the post-finalization of consolidated financial statements, purchase price accounting, hybrid arbitrage, and country-by-country safe harbor requirements. Finally, they discuss what makes a ‘good’ credit for Pillar Two, the US R&D credit, the reverse consensus process for qualifying a QDMTT, permanent safe harbors, and what guidance to expect next. Timestamps: 3:00 – What is Pillar Two? 5:30 – What taxpayers are subject to Pillar Two? 5:45 – What is the status of Pillar Two enaction around the globe? 7:15 – Another 40-50 countries will enact Pillar Two in 2025 according to the OECD. What are Steve’s comments on that announcement, particularly Puerto Rico’s consultation document? 11:05 – We’re into Q4 now, what are some common themes Steve is seeing as he works with companies as they approach year-end? 13:00 – Any particular challenges or themes from a data-readiness perspective for companies that operate in a jurisdiction with a below 15% rate for Pillar Two purposes? 14:15 – What are Steve’s views on compliance process, what companies need to be doing, and what do companies need to be doing around the globe? 16:45 – What about Belgium’s registration process and data volume requirements? 17:50 – What are some traps for the unwary for companies this year? 17:55 - Consolidated financial statements 20:30 – Purchase price accounting 21:25 – Hybrid arbitrage 22:35 – Country-by-country reporting safe harbor requirements and the UTPR safe harbor 25:55 – The role can local statutory requirements play in Pillar Two calculations 28:00 – What is the general state of play from an incentive perspective? 31:55 – What is the reverse consensus process regarding what qualifies as a QDMTT? 33:55 – What can taxpayers expect to come next? 36:10 – What can we anticipate for future administrative guidance?