Cross-border Tax Talks Pillar Two SESHion: ‘Simplified’ safe harbour
Mar 9, 2026
Steve Kohart, a New York City-based international tax partner at PwC and former OECD advisor, breaks down the permanent simplified ETR safe harbor and its transitional bridge from CBCR. They cover the January side-by-side agreement, denominator and numerator adjustments, deferred tax challenges, JV and M&A complications, transition rules, excess negative taxes, and practical compliance priorities.
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Denominator Still Requires Many Adjustments
- The simplified ETR denominator starts with jurisdictional PBT but requires many adjustments (exclude dividends, equity gains, bribes, shipping/insurance exceptions, add goodwill without DTLs).
- Despite the name, the adjustments may force a third set of books because of frequent divergences from accounting and tax bases.
Numerator Still Complex And DTL Heavy
- The numerator starts with book taxes (current and deferred) with many Globe-like adjustments including excluding non-covered taxes, uncertain taxes, bad DTLs, and recasting deferred at 15%.
- Identifying 'bad' DTLs remains burdensome because taxpayers may have thousands of deferred items to classify.
Plan For Joint Venture ETR Calculations
- Expect separate ETR computations within the same jurisdiction for joint ventures and plan data collection ahead of time.
- Pre-Pillar 2 JVs often lack tax-sharing mechanisms so obtaining JV data can be especially challenging.