Background

On 31 May 2023, the Dutch government presented the legislative proposal to implement pillar 2, the Global Minimum Tax Act 2024 (wet minimumbelasting 2024). The provisions of the proposal are closely aligned with the OECD's model rules for the global minimum tax and the EU Directive, but the Dutch government also took into account or responded to some of the comments raised during the public consultation of the draft legislative proposal. The proposal contains an entirely separate levy in a separate act to avoid any confusion with the terms used in the Dutch corporate income tax. In this tax alert, our tax team in Amsterdam provides the highlights of the proposal.

The Global Minimum Tax Act 2024

The Global Minimum Tax Act 2024 contains three taxes to reach a minimum effective tax rate of 15%:

1. The Qualified Domestic Minimum Top-up Tax ("QDMTT");
2. The Income Inclusion Rule (“IIR”); and
3. The Undertaxed Payments Rule (“UTPR”).

Although the EU Directive and the OECD model rules do not require the implementation of a QDMTT, the Dutch government implements it so any potential top up tax in relation to companies tax resident in the Netherlands, can still be levied by the Netherlands.

The UTPR can be implemented as either a deduction limitation for the regular corporate income tax or as a separate top up tax. The Dutch government opted for an additional levy instead of a new deduction limitation to avoid further complexity in the existing deduction limitation provisions in the Dutch corporate income tax.

Implementation of follow up rules

The explanatory memorandum provides explanations to the various elements of the global minimum tax, just as the OECD model rules and guidelines do. The government notes that certain elements have not yet crystallized and the Global Minimum Tax Act 2024 delegates the authority to quickly implement additional rules on the basis of the rules agreed upon by the OECD Inclusive Framework.

The Dutch tax authorities have quickly created a global minimum tax expertise team and the government notes that they are instructed to be accessible to taxpayers in case the global minimum tax is unclear and can also assist taxpayers in coordinating questions across various countries.

Formal obligations

A constituent entity in the Netherlands must self-assess the top-up tax payable and pay the top-up tax (if any) within 17 months after year end. This is two months later than the filing deadline for the GloBE information return (15 months after year end). For the first year the global minimum tax applies to a specific taxpayer, the deadline to file the tax return is 20 months after year end. The Dutch tax authorities have until 6 years and 4 months after year end to raise an assessment if they consider the top-up tax paid insufficient.

Mutual administrative assistance in tax matters and treaty application

During the online consultation stakeholders signaled that legislation regarding the mutual administrative assistance and the treaty application remain unclear. In the explanatory memorandum, the government addresses some of these concerns.

Currently, there is no mechanism for dispute resolution when the involved countries have differing interpretations regarding the application of rules to a specific taxpayer. The Dutch government noted that it is currently in anticipation of OECD developments to resolve this matter but is currently also assessing the feasibility of alternatives such as an Advance Pricing Agreement or the use of mutual agreement procedures. The Dutch government notes that the conclusion of a multilateral instrument would be the best solution.

Next steps

The aim is to enact the proposal as law effective per 1 January 2024 and is expected to be discussed in parliament after the summer recess. During this process, further questions are expected to be raised and further answers (where possible) are expected from the government. It is important to note here that the real guidance and answers in relation to the global minimum tax, must be sought from the OECD IF and not the Dutch government.

Dentons is closely monitoring the developments and we would be pleased to assist you with any questions you may have on the global minimum tax and the Dutch implementing rules.