Cross-border Tax Talks

Searching for Pillar Two clarity: The OECD’s Administrative Guidance

Doug McHoney (PwC's US International Tax Services Global Leader) records from PwC’s 2023 International Tax Conference, where he is joined by Phil Ramstetter, PwC International Tax Partner based in Chicago. Phil was formerly a tax policy consultant for Business at OECD (BIAC). Doug and Phil overcome conference background noise to discuss the recent administrative guidance, but start with a history lesson on Pillar Two, when it was merely the Digital Project. Topics covered include blended CFC regimes, GILTI, expense apportionment, loss-making jurisdictions, transition period transactions, common control, the outlook for future guidance and some of the remaining open questions.

Timestamps:

• 1:50 - Where was Pillar Two five years ago?
• 4:00 - How does the Pillar Two administrative guidance released in February 2023 fit broadly into the model rules?
• 5:35 - What did the administrative guidance tell us about blended CFC regimes and GILTI?
• 8:10 - How do the rules address a scenario where a US multinational or US holding company has CFCs that are all above the 13.125% tax rate under the GloBE calculation?
• 10:20 - A press release from US Treasury came out the same day as the administrative guidance that claimed the guidance provided certainty on several key issues, including “protection of the Low Income Housing Tax Credit as well as Green Tax Credits including those that were included in the Inflation Reduction Act.” Does this OECD guidance provide such protection?
• 11:05 - Generally, what types of credits are ‘good’ covered taxes?
• 12:15 - What did the guidance provide regarding tax equity structures?
• 13:50 - In addition to the covered taxes questions, two of the most common provisions mentioned are related to loss-making jurisdictions and transition period transactions.
  • What do these provisions tell us about loss-making jurisdictions?
  • What do they tell us about transition period transactions?
• 19:15 - How did the guidance address Qualified Domestic Minimum Top-up Taxes (QDMTTs)?
• 22:35 - What are the implications of varying jurisdictions customizing the QDMTT?
• 25:00 - Rapid fire discussion
  • 25:15 - The rebasing of the 750 million Euro threshold
  • 26:15 - Common control
  • 28:05 - Excluded dividends
  • 29:00 - Debt release (cancellation of indebtedness income)
• 30:15 - When, and what, can we expect next from the OECD?

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