The Legislation in a Nutshell

The Dutch minimum tax act legislative proposal was submitted to the Dutch parliament on 31 May 2023, bringing the Netherlands one step closer to the implementation of the global Pillar Two rules. The Dutch minimum tax act proposal is based on the EU Pillar Two directive and the OECD Pillar Two model rules. It aims to ensure Multinational Enterprises (MNEs) with consolidated revenue equal to or exceeding EUR 750 million are subject to at least 15% taxation on their profits in each country where they operate as of December 31, 2023.

The legislative proposal contains an income inclusion rule, an undertaxed payment rule, and a qualified domestic minimum top-up tax, which should give the Netherlands additional taxation rights in case an MNE is subjected to an effective tax rate of less than 15% in either the Netherlands or another country.

This legislative proposal follows the Dutch draft consultation document proposal issued back in October 2022. In comparison to the previously published version, among other things safe harbour rules and guidance on compliance have been included in the May 31, 2023 legislative proposal. These new inclusions, which are based on the OECD administrative guidance provide additional practical and important guidance. Besides this, the legislative proposal acknowledges that the OECD may issue further guidance to the OECD model rules at later stages and that this may be reflected in later Dutch legislation or regulations.

By submitting the legislative proposal to the Dutch parliament, an important step towards the implementation of Pillar Two in the Netherlands was taken. The proposal will be discussed and adopted by the Dutch parliament in the coming months and should enter into force as of December 31, 2023 in the Netherlands.

Front running EU country

From a practical perspective, the legislative proposal and accompanying notes state that the Netherlands is keen to be one of the first moving countries in the EU. This proposal clarifies that a special team will be created within the Dutch tax authorities to focus on Pillar Two. Taxpayers will have the possibility to discuss Pillar Two related questions with this team and advance certainty may become possible.

With Pillar Two on the brink of implementation in the Netherlands and legislative proposals expected in a significant number of other countries, in-scope MNEs should ensure they are ready for compliance and understand the impact of Pillar Two on their tax structure as soon as possible, strongly recommended in the course of 2023.

Need for a practical approach

The implications of the Pillar Two rules could be broad and we have already experienced that MNEs find it challenging to define the next steps to ensure compliance with these new rules. Based on this, we have co-developed a practical approach that starts with a Rapid Assessment to determine where an internationally active company is at in terms of Pillar Two awareness and readiness.

The benefit of such Rapid Assessment lies in the fact that such assessment will be tailor-made to the specific needs and will provide preliminary insights to determine where you stand towards compliance with Pillar Two. That assessment will also enable us to draw up a timeframe to determine the next steps toward actual implementation and ultimately the filing of the Information return.

For more information on our approach, kindly reach out to your RSM contact.