BDO Global Tax Alert

Consultation launched on Minimum Tax Act 2024 (Pillar Two)

27 October 2022

On 24 October 2022, the Dutch Ministry of Finance opened a consultation on a draft Minimum Tax Act 2024 that would implement the Pillar Two rules in the Netherlands. In short, the draft bill aims to ensure that multinationals will be subject to a global minimum tax rate of 15%. The government intends to submit a final bill to Parliament so that the new legislation can take effect on 1 January 2024 regardless of whether an agreement is reached at the EU level.


The minimum corporate tax in the draft bill stems from the political agreement reached by the OECD/G20 Inclusive Framework on 8 October 2021 on a two-pillar framework that would revise the international tax system (for prior coverage, see the article in the November 2021 issue of Corporate Tax News).

Pillar One aims to re-allocate a part of the residual profit of the largest and most profitable multinationals to jurisdictions where the customers and users of those multinationals are located even though they are not physically present in those jurisdictions. Pillar Two puts a floor on tax competition through the introduction of a 15% global minimum corporate tax on all multinationals with an annual turnover of EUR 750 million or more. The Income Inclusion Rule (IIR) imposes a top-up tax up to 15% on profits arising in a jurisdiction when the effective rate is below the minimum rate. Consequently, the IIR acts as a disincentive for multinationals to allocate their profits to low-tax jurisdictions. As a backstop, the rules provide for an undertaxed payments rule (UTPR) that would allow jurisdictions to include foreign profits in their minimum tax base if these profits are not sufficiently taxed nor included in an IIR.

On 20 December 2021, the Inclusive Framework released its model rules—the GloBE rules—to assist its 137 member countries in implementing the political agreement on the Pillar Two framework into domestic legislation (for prior coverage, see the tax alert dated December 2021). Two days later, the European Commission published its proposal for an EU directive that closely follows the model rules and in June 2022, 26 of the 27 EU member states agreed to the proposed directive (for prior coverage, see the tax alert dated 23 December 2021 and the alert dated 20 June 2022). Because of Hungary's opposition to the directive, the finance ministers of France, Germany, Italy, the Netherlands and Spain released a joint statement announcing their determination to implement the global minimum effective taxation in 2023 by any possible legal means (for prior coverage, see the tax alert dated 16 September 2022).

Implementation consequences for the Netherlands

The Dutch draft bill would introduce a new tax act that applies to group entities (companies and branches) with annual turnover of at least EUR 750 million, regardless of whether they operate solely domestically or internationally. If a group meets this threshold, the Dutch implementation of the Pillar Two rules would consist of three mechanisms to ensure a minimum taxation of 15% that would apply if the aggregated effective tax rate of constituent entities in a jurisdiction is below that percentage:

  1. An IIR that would impose a top-up tax on the Dutch ultimate or intermediate parent entity in respect of the low-taxed income of a constituent entity;
  2. A UTPR that would impose a top-up tax to the extent the profit is not sufficiently taxed in another jurisdiction under an IIR or a qualified domestic minimum top-up tax (QDMTT); and
  3. A QDMTT that would allow the Netherlands to levy a top-up tax on its constituent entities if the effective tax rate in the Netherlands would fall below 15%.

Consultation on draft bill 

Although the EU’s Pillar Two Directive has not yet been adopted and may never be adopted, the Netherlands launched an online consultation on its draft bill. Given the speed with which the bill was drafted, its ramifications and the complexity of the GloBE rules, the Ministry of Finance announced that it may further revise the text of the draft bill in the coming months. Nevertheless, it values feedback on the current draft so that the input can be incorporated in the version of the bill that will be presented to Parliament. The internet consultation is open until 5 December 2022.

Going forward

If the bill is enacted, the IIR and QDMTT would apply for financial years starting after 31 December 2023 and the UTPR for financial years starting after 31 December 2024. However, in specific instances, transitional rules would affect intragroup transfers as from 30 November 2021.

Lisanne Rijff

Mark Laeven