News item | 5/31/2023 | 15:58
The 2024 Minimum Tax Bill was presented to the House of Representatives today. This bill ensures that multinationals and domestic companies with a turnover of € 750 million or more always pay at least 15% effective tax on their profits. The Netherlands is thus implementing an international agreement that was concluded in October 2021 with 138 countries. This is an important measure to combat global tax avoidance. The Netherlands is leading the way in the EU by sending the bill to parliament today.
Companies will only pay the new tax if the group to which those companies belong in a country effectively pays too little profit tax. This is determined by subtracting the effective tax rate in a country from the minimum tax rate of 15%. The minimum tax rate of 15% is an internationally agreed rate. The operation of the measure is illustrated in the example below:
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The company C Co pays tax in the country where it is established at an effective rate of 10%. The BV, which is located in the Netherlands, is the mother of this group. This means that C Co is low-taxed and the 2024 Minimum Tax Bill therefore applies. After all, in this example there is a positive difference of 5%, namely the minimum tax rate of 15% less the effective tax rate of 10%. This means that at the level of the BV a percentage of 5% is levied on the profit of C Co.
Less shift
This bill will reduce the incentive for companies to shift profits to low-tax states. In addition, the bill aims to set a lower limit to tax competition between states. This should prevent a race to the bottom in profit tax and create a more level playing field for internationally operating companies.
State Secretary Van Rij (Finance): “I am pleased with this new step that will lead to a global approach against tax avoidance. It is one of my spearheads to combat tax avoidance. As a result of tax avoidance, the costs of general provisions ultimately fall on citizens and businesses who do pay their taxes (on time). That is unjust, all the more so because those who evade taxation do benefit from tax-funded facilities.”
Creation
The global minimum tax (Pillar 2) is part of the OECD agreement on the review of the international tax system. That agreement is supported by 138 countries. The European Commission has proposed a directive to implement this minimum tax in the EU. On December 15, 2022, the EU Member States unanimously reached an agreement on this proposal. The directive must be transposed into national law by December 31, 2023. The draft implementation bill was submitted for public internet consultation in the Netherlands at the end of 2022. After processing the responses from this consultation, the bill was submitted to the Council of State for advice.
The bill will be discussed in the House of Representatives in the coming months and then in the Senate. The entry into force of the bill is scheduled for December 31, 2023. The Tax and Customs Administration will then effectively implement the law. This is done, among other things, by setting up a Pillar 2 expertise team.