Monday, January 15, 2024

The Netherlands Minimum Tax Act 2024 - The Global Minimum Taxation

Unveiling Reporting Dynamics, Additional Tax Calculation, and Safe Harbor Strategies


The Netherlands has taken a significant step in implementing the Pillar 2 Global Minimum Tax with the release of the Minimum Tax Act 2024 guide. Aligned with the Council Directive (EU) 2022/2523, this guide serves as a roadmap for businesses grappling with the intricacies of the evolving tax landscape.

Key Provisions Simplified:

1. Annual Reporting Obligation Companies are required to file an extra tax declaration each year. If already submitted elsewhere and shared with the Netherlands, a notification is essential. For the initial reporting fiscal year (spanning from January 1 to December 31, 2024), the notification deadline is extended to June 30, 2026.

2. Additional Tax Return and Payment An additional tax return and payment are mandated if extra tax is owed. The deadline is 17 months after the fiscal year end, with an extended 20-month period for the initial year.

3. Operational Framework of Minimum Tax Act 2024

  • Scope: The act covers group entities, including permanent establishments, of both multinational and domestic groups, provided the consolidated annual revenue is at least EUR 750 million.

  • Qualifying Income Criteria: In-scope groups must assess if the effective tax rate is below 15% for each country of operation. The effective tax rate is calculated as (taxes / net qualifying income) * 100%.

  • Taxes Considered: The act encompasses all taxes on income and/or profits, including current and deferred taxes with specific adjustments.

  • Additional Tax Calculation: Determining the additional tax rate involves subtracting the effective rate from the 15% minimum rate. Excess profit is established by deducting excluded income based on real economic presence from net qualifying income.

  • Levying Additional Tax with Examples: Additional tax is imposed through three measures: Qualified Domestic Minimum Top-Up Tax (QDMTT), Income Inclusion Rule (IIR), and Under-taxed Profit Rule (UTPR).

  • Safe Harbor Rules: The guide provides various temporary and permanent safe harbor rules to help in-scope groups navigate administrative complexities.