Cross-border Tax Talks

Pillar Two: A Japanese perspective

Doug McHoney (PwC's US International Tax Services Global Leader) is joined by Shin Yamaguchi at PwC’s 2023 International Tax Conference. Shin is a Tokyo-based International Tax Partner, where he leads PwC Japan’s Inbound Tax Practice. Doug and Shin discuss Japan’s latest tax developments, focusing on the Pillar Two rules (of course!), specifically, UTPR, IIR, Safe Harbours, QDMTT, the GloBE Information Return and effective dates. They also discuss the Japanese legislative process. Since the recording of this podcast Japan has enacted their 2023 Tax Reform Bill which includes the Pillar Two Income Inclusion Rule which applies on or after April 1, 2024.

Timestamps:

• 1:30 - Before diving into Pillar Two, how did Shin’s experience advising multinationals in the United States impact his experiences advising multinationals in Japan?
• 3:50 - What is the Japanese legislative process?
• 5:30 - How would additional guidance be incorporated in that process, if tax reform can only be legislated once a year?
• 6:15 - Is there a requirement for enforcement orders to be released within a certain time period?
• 8:10 - How many Japanese companies may be in scope of these rules?
• 8:45 - What did the legislation say about the income inclusion rule (IIR) and under tax profits rule (UTPR)?
• 11:05 - Were any safe harbours included in the legislation?
• 12:00 - What did the legislation say regarding effective dates?
• 13:45 - How relevant is the QDMTT for Japanese multinationals?
• 15:30 - How is Japan addressing Pillar Two forms and compliance, and how might that fit in with the GloBE information return?
• 18:30 - How do the Japanese CFC rules work?
• 23:00 - What about to the extent that jurisdictions begin to implement QDMTTs around the world. Any thoughts on how that may be a creditable tax in Japan?
• 24:40 - What about if the Japanese parent companies have a loss for domestic purposes, but there is still CFC income?
• 27:10 - Moving on to operational readiness, how are multinationals starting to prepare for Pillar Two?
• 32:30 - Are we seeing any trends in the Japanese deals market?
• 35:00 - Are we seeing any trends in tax controversy?

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