Netherlands: Consultation on implementation of Pillar Two rules

OECD/G20 Inclusive Framework’s proposed solution to the tax challenges arising from digitalisation of the economy

Internet consultation on a legislative proposal to implement the Pillar Two rules

The Dutch Ministry of Finance on 24 October 2022 launched an internet consultation on a legislative proposal to implement the Pillar Two rules of the OECD/G20 Inclusive Framework’s proposed solution to the tax challenges arising from digitalisation of the economy. The rules under Pillar Two would establish a global minimum tax of 15% for multinational enterprises with a turnover of at least €750 million, effective from 2023.

The consultation follows the statement issued on 9 September 2022 by the Netherlands, together with France, Germany, Spain, and Italy, expressing their commitment to implementing the global minimum tax in 2023. Read TaxNewsFlash


The European Commission (EC) published a proposal for an EU directive on 22 December 2021 to incorporate the OECD’s Pillar Two global anti-base erosion (GloBE) rules into EU law. Read a KPMG EU Tax Centre report

The EU proposal aims to ensure a global minimum effective taxation of 15% for entities resident in a Member State and for non-EU resident entities of an EU-parented entity whose consolidated group revenue exceeds €750 million in at least two of the last four consecutive fiscal years. Unlike the OECD GloBE model rules, the EU proposal also applies to large-scale domestic groups.

The Economic and Financial Affairs Council of the European Union (ECOFIN) has not yet reached political agreement on the proposed EU directive, following a veto of the proposal by Hungary on 17 June 2022. If the EU Member States do not reach consensus on the adoption of the EU directive in the upcoming months, one possible solution could be for the proposal to be adopted under the “enhanced cooperation” procedure, in which a minimum of nine EU Member States can choose to forge ahead. Alternatively, the EU Member States may seek to proceed unilaterally.

By launching the internet consultation process, the Netherlands is showing its commitment to implementing Pillar Two with a strong preference for an EU harmonized legal basis in the form of an EU directive.

Internet consultation

In the internet consultation process, input is invited on the legislative proposal (70 pages) and the explanatory notes (267 pages). The legislative proposal introduces the three key components of the GloBE model rules:

  • Qualifying domestic minimum top-up tax
  • Income inclusion rule (IIR)
  • Undertaxed profits rule (UTPR)

The explanatory notes state that the goal is full alignment with the proposed EU directive and the GloBE model rules, and the Netherlands will not extend or significantly deviate from the proposed EU directive.

The tax will take the form of a separate levy (i.e., it will not be part of the corporate income tax charge, but come on top of it) and be imposed in a separate act (Wet minimumbelasting 2024). The tax will be levied as a tax on the basis of a self-assessment in the form of a top-up tax information return. The legislative proposal also provides for the possibility of imposing additional ex-officio tax assessments, including the option of charging interest and penalties, subject to conditions.

The consultation process will span six weeks and any input is to be submitted to the Dutch Ministry of Finance by 5 December 2022. The Dutch government will consider its options based on the response received and then pass the proposal on to the Lower House of Parliament, probably in the spring of 2023. Implementation of the legislative proposal is expected to occur on 31 December 2023, with the qualifying domestic minimum top-up tax and the IIR becoming effective for financial years starting on or after 31 December 2023 and the UTPR set to become effective one year later, i.e., on or after 31 December 2024. 

KPMG observation

Under the proposed EU directive, some Member States may opt to defer implementation of the qualifying domestic minimum top-up tax and the IIR until financial years starting on or after 31 December 2029. If the ultimate parent entity (UPE) of a Dutch group company is a resident of an EU Member State that has opted for this deferral, the Netherlands can apply the UTPR to the low-taxed income of that group, including the group’s UPE.

Certain issues are not included in the legislative proposal, including:

  • Possible safe harbors for groups to reduce compliance costs
  • The administrative framework for the exchange of top-up tax information returns
  • Dispute resolution mechanisms

Further guidance is expected on these issues and also on a variety of issues and questions that were raised as part of the OECD public consultation meeting on 25 April 2022. In addition, the introduction of a model provision to introduce a subject to tax rule (STTR), together with a multilateral instrument, is expected.

Read an October 2022 report prepared by the KPMG member firm in the Netherlands


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