Tax

Building on years of international efforts to adapt tax rules to an increasingly digitalised economy, the OECD/G20 Inclusive Framework has reshaped the global tax landscape through its two pillar solution.

As part hereof, the OECD/ Inclusive Framework released the Pillar Two Rules at the end of December 2021, resulting in a 15% minimum tax rate for in-scope (multinational) groups in all jurisdictions where they have presence as early as of financial years 2024. These rules are by now introduced in many jurisdictions, imposing a global minimum tax and significantly expanding compliance and reporting obligations for (multinational) groups.

While the OECD has finalised the technical framework for Pillar One, implementation of Amount A remains uncertain due to the absence of global consensus. Amount B, by contrast, is incorporated in the OECD Transfer Pricing Guidelines and can be applied by jurisdictions to determine a return on sales for in-scope distributors.

The anti-hybrid mismatch rules of the EU Anti-Tax Avoidance Directive (ATAD 2) aim to prevent situations of a double deduction and a deduction without a corresponding inclusion of the income at the level of the recipient resulting from a hybrid mismatch. All EU Member States have implemented ATAD2 in their domestic laws as from 1 January 2019 (for Belgium) or as from 1 January 2020 and 1 January 2022 (for a.o. the Netherlands and Luxembourg).

It is noted that EU Member states can introduce rules that go beyond the minimum standards of the ATAD2 directive. An example of this is the introduction of the ATAD2 documentation requirement in the Netherlands. Following the Dutch ATAD2 documentation requirement, all Dutch taxpayers should have documentation available in their administration that shows the (non-)applicability of the ATAD2 rules.

In recent years tax authorities have placed more emphasis on combatting the use of abusive and aggressive tax structures by companies operating across borders, to ensure fair taxation. The EU and OECD have provided tax authorities with various instruments such as the Anti-Tax Avoidance Directive (ATAD) and the Multilateral Instrument. The judgements handed down by the CJEU on the Danish cases have also set an important precedent.

However, since entities with no minimal substance and economic activity are supposedly still used for improper tax purposes, the European Commission recently issued a new proposal (ATAD 3). It is highly recommended that taxpayers already assess the possible impact of the proposal and consider opportunities for strengthening their local footprint and/or restructuring.

Sustainability is becoming an increasingly important factor in the decisions of investors, companies, consumers, shareholders and policy and law makers. The broadly supported awareness of Environmental, Social and Governance (ESG) objectives is reflected in many international voluntary standards as well as in an increasing number of European regulations.

Addressing the tax challenges of the digitalizing economy has become a priority within the OECD as well as within the EU. Both the OECD and the EU have launched proposals and developments follow each other rapidly.