Netherlands: Letter submitted to Parliament on Pillar Two effect on Dutch tax incentives
Effect expected to be limited
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November 4, 2024
The State Secretary of Tax Affairs on October 25, 2024, submitted to Parliament a letter outlining the possible effect of Pillar Two implementation on Dutch tax incentives. Key takeaways include:
- Limited impact on existing incentive regimes: Although Pillar Two could potentially undermine the policy objectives of certain existing tax regimes, such as the innovation box regime and the tonnage tax scheme, the effect is expected to be limited given the €750 million annual revenue threshold and standard 25.8% corporate income tax rate in the Netherlands (based on which most companies’ effective tax rates would remain above 15% even under consideration of certain tax incentives).
- Qualified tax credits: The assessment of whether a qualified tax credit ought to be introduced in the Netherlands requires a careful analysis of the benefit and necessity of such tax credit (taking into consideration the scope, design and objectives). The feasibility, legal sustainability (including international and European frameworks, and the EU State aid rules), and budgetary consequences must be considered.
Read a November 2024 report prepared by KPMG's EU Tax Centre