Corporate restructuring specialist Alexander Spoor of Pinsent Masons in Amsterdam was commenting after proposed new legislation was submitted to the Dutch parliament that is designed to ensure that multinational companies and domestic businesses with a turnover of €750 million or more always pay a minimum effective tax rate of 15% on their profits.

The proposed new Minimum Tax Act 2024 would implement an international agreement that the Netherlands is a party to.

The Netherlands is the first EU country to have submitted draft legislation to its domestic parliament to implement the ‘Pillar Two’ agreement, which 138 countries endorsed in 2021.

The European Commission proposed an EU directive to implement this Pillar Two minimum tax across the EU. On 15 December 2022, EU member states unanimously agreed to the proposal. The directive must be incorporated into national legislation by 31 December 2023, which is also the intended effective date for the Minimum Tax Act 2024 in the Netherlands.

Spoor said: “Multinational companies in scope of this new legislation that have not already done so should consider aligning their global group structures and supply chains to optimise their tax positions and compliance with the new rules after the Pillar Two legislation becomes effective. The purpose of these potential restructuring efforts may be to align the allocation of profits and substance more closely with the jurisdictions where value is created and to ensure that profits are subject to the minimum effective tax rate required under Pillar Two.”

Tax expert Steven Vijverberg, also of Pinsent Masons in Amsterdam, said: “Companies will only be required to pay the new tax if their group pays less than the minimum tax rate of 15% in a particular country. The calculation is based on deducting the effective tax rate in a country from the minimum tax rate as calculated under the Pillar Two rules. If the effective tax rate in a country is less than 15%, then a top-up tax up to the minimum 15% is due.”

“The objective of this bill is to make it harder for companies to shift profits to low-tax jurisdictions and to establish a minimum threshold for tax competition between countries, thus preventing a race to the bottom in corporate taxation,” he said.