Memorandum in response to the report containing questions on the scope of the proposal, the additional tax, the effective tax rate, the impact on various corporate tax measures, aspects of formal law and transitional provisions
The Secretary of State for Finance recently sent a note in response to the report accompanying the Minimum Tax Act 2024 (Pillar 2) to the House of Representatives.
The Minister of State answers questions about the draft law. Questions were raised about, among other things, the implementation consequences for the Netherlands in general and more specifically about the scope of the draft law, the calculation and method of the additional tax, the effective tax rate, the rules for mergers, demergers, reorganizations, ownership structures, formal legal aspects and transitional provisions. .
He also uses a number of concrete examples to point out the impact of various measures in the Corporation Tax Act 1969 on the effective tax rate for implementing the bill. The Secretary of State explains whether and how the following measures affect the calculation of the additional tax: i) the profit stripping procedure; 2) CFC management; 3) Measures taken against hybrid mismatches; 4) Withholding tax on interest and royalties; v) Limits of the liquidation and stop loss system; 6) Reduce loss mitigation; and 7) measures to combat mismatches when applying the principle of independence.
The memorandum in response to the report can be viewed here.
background
The 2024 Minimum Tax Bill ensures that multinationals and local companies with a turnover of €750 million or more effectively always pay at least 15% tax on their profits. Companies will pay the new tax only if the group to which those companies belong actually pays very little profits tax in a country. This is determined by subtracting a country’s effective tax rate from the minimum tax rate of 15%.
The global minimum tax (Pillar 2) is part of the OECD Agreement on the Review of the International Tax System. This agreement is supported by 138 countries. The European Commission later proposed a directive to implement this minimum tax in the EU. On 15 December 2022, EU Member States unanimously reached agreement on this proposal. The directive must be converted into national law by 31 December 2023. For a more detailed explanation of the draft Minimum Tax Bill 2024, see also EYFN 2023/23 and the alert in English: Netherlands issues proposed Pillar 2 legislation (ey.com)
