The Dutch Ministry of Finance recently published a legislative proposal for a minimum tax from 2024 onwards, for online consultation. This legislative proposal aims to introduce a minimum level of taxation for multinational enterprises. This is referred to internationally as ‘Pillar 2’. The legislative proposal gives shape to the Dutch implementation of the proposed EU Directive of 22 December 2021 (which was followed by a revised text published by the EU on 16 June 2022).
General contents of the legislative proposal
The legislative proposal aims to introduce complex new tax legislation for Dutch entities and permanent establishments that are part of a multinational group with a worldwide turnover of at least € 750 million.
The proposal would ensure that a multinational group pays taxes at a rate of at least 15% on the profits as reported in the consolidated annual accounts. This is known as the effective tax rate. It is noted that a number of (fiscal) corrections may be applied to that profit.
The legislative proposal describes a number of methods to reach this effective tax rate of 15%. The two main methods are:
Additional taxation at the level of Dutch (subsidiary) entities, in cases where the current tax rules lead to an effective tax rate of less than 15% (averaged out over all Dutch subsidiaries).
Additional taxation at the level of the Dutch parent company, if subsidiaries established abroad are subject to an effective tax rate of less than 15%.
The additional taxation does not apply to entities in a specific jurisdiction if the total turnover of the group entities established in that jurisdiction is less than € 10 million and the profit is less than € 1 million. In its current form, Pillar 2 does therefore not appear to significantly affect the tax position of smaller businesses.
From online consultation to implementation of the legislation
The proposed EU Directive results from broader international negotiations regarding Pillar 2. This proposal has not yet been finalised at a European level, and the negotiations are taking longer than expected. It is against this backdrop that The Netherlands has published this legislative proposal for online consultation. Anyone can provide feedback.
The amended proposal is scheduled to be presented to the Dutch House of Representatives and the Senate in the course of 2023. After that, the legislation is intended to enter into force on 31 December 2023 (effectively 1 January 2024).
Contact and questions
We will of course monitor the legislative process closely. Given the steps that have yet to be taken, it is possible that the definitive legislative proposal will differ from the current legislative proposal for consultation. It is important for multinational enterprises to assess, on time, the impact of Pillar 2 on their tax position and business operations.
If you have any questions about Pillar 2, or if you would like to discuss the possible consequences of this proposal for your organisation, please do not hesitate to contact us. Our advisors would be happy to discuss the issues that this proposal may raise for your business.
The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly consultant