The OECD’s Pillar Two project aims to ensure that MNE groups meeting the EUR 750 million revenue threshold are always subject to a minimum corporate taxation of at least 15%. Much progress has been made in the past 18 months:

  • On 20 December 2021, the OECD released its Pillar Two Model Rules, also referred to as the “GloBE” rules, we refer to our Tax Flash of 21 December 2021.
  • On 24 October 2022, the Netherlands already launched a public consultation for the implementation of the Pillar Two rules in Dutch domestic legislation, we refer to our Tax Flash of 25 October 2022.
  • On 15 December 2022, the EU formally approved the EU directive setting out the Pillar Two model rules for EU Member States (EU Directive), we refer to our Tax Flash of 12 December 2022.
  • On 20 December 2022, the OECD released amongst others the long awaited “Guidance on Safe Harbours and Penalty Relief”, which notably contains an agreed transitional “CbCR Safe Harbour” for the initial three years (in most cases). Reference is made to our Tax Flash.
  • On 1 February 2023, the OECD approved its first Administrative Guidance for the Pillar Two rules.

Going forward, we are still expecting the announced Qualified Domestic Minimum Top-up Tax (QDMTT) Safe Harbour rules before summer 2023 and any additional Administrative Guidance to be published by the OECD on the remaining open items.

The Dutch Pillar Two Act

The Dutch Pillar 2 Act contains a (Domestic) Income Inclusion Rule (IIR) and QDMTT for taxable periods starting on or after December 31, 2023, and an Undertaxed Profits Rule (UTPR) for taxable period starting on or after December 31, 2024. Based on a first review, some changes are made when comparing the Dutch Pillar Two Act to the draft bill launched as part of the public consultation late last year. We are currently performing an in-depth review to map out the relevant differences.

Key considerations Dutch Pillar Two Act
  • The Netherlands chooses to implement Pillar Two in a separate Pillar Two Act instead of an implementation within its existing corporate income tax act.
  • The Dutch Pillar Two Act mentions that the Commentary to the OECD Model Rules of 11 March 2022 and the OECD Administrative Guidance of 1 February 2023 (published after the adoption of the EU Directive) can serve as interpretation of the Dutch Pillar Two Act. In the legislative commentary, it is mentioned that future OECD commentary and guidance is expected and that such may become relevant to future Dutch legislation.
  • The Netherlands chooses to introduce a QDMTT. In line with the Administrative Guidance of 1 February 2023, the QDMTT would apply before any CFC taxes.
  • The Netherlands chooses to levy any UTPR by means of an additional levy instead of a deduction limitation.
  • The Dutch Pillar Two Act contains an implementation of the transitional CbCR Safe Harbour. Furthermore, the Dutch Pillar Two Act contains a delegation basis for a future permanent Safe Harbour in line with the agreed framework of the OECD/IF for a permanent Safe Harbour.
  • The Dutch government mentions in the commentary to the Dutch Pillar Two Act that it is aware that the Pillar Two Rules do not fully align with the US GILTI and AMT. However, it mentions that it cannot unilaterally remove such misalignment. 
  • The Dutch Pillar Two Act contains a delegation basis to consider the Blended CFC regime allocation that is included in the OECD Administrative Guidance via a general administrative measure (in Dutch: AMvB). 

Next steps

The Dutch Pillar Two Act will first be subject to review and approval by the House of Representatives. After the House of Representatives passes the bill, it will be sent to the Senate for further approval. The bill is enacted once published in the Official Gazette. 

How can we support you?

Other EU countries are monitoring the Dutch implementation process as they expect similar questions for their own implementation process. To get attention as early as possible, it could be considered raising questions in the Dutch parliamentary process. We can assist you in this process. 

Our Pillar Two team is available to support you in analyzing and modelling the impact of the Dutch Pillar Two Act on your group, setting up compliance processes and exploring ways to mitigate increased taxation and complexity. Especially considering that the Dutch Pillar Two Act practically has retroactive effect due to transition rules that apply as from 1 December 2021 (which is in line with the EU Directive as well as the OECD Model Rules), we advise in-scope groups to continuously assess these rules in particular.

Should you have any questions in the meantime, please contact a member of our Pillar Two team or your regular trusted contact at Loyens & Loeff.