News article | 05/31/2023 | 15:58
The Minimum Tax Bill of 2024 was introduced today in the House of Representatives. This bill ensures that multinationals and national companies with a turnover of 750 million euros or more always pay at least 15% effective tax on their profits. The Netherlands is thus implementing an international agreement concluded in October 2021 with 138 countries. This is an important measure to combat global tax evasion. 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 they belong in a country actually pays too little income 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 measurement is illustrated in the example below:
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C Co pays tax in the country where it is established at the 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 therefore the minimum tax bill of 2024 applies. After all, in this example, there is a positive difference of 5%, which is the minimum tax rate of 15% minus the effective tax rate of 10%. This means that at the BV level a percentage of 5% is taken from the profit of C Co.
Less lag
This bill will reduce the incentive for companies to shift profits to low-tax states. In addition, the bill seeks to set a lower limit on interstate tax competition. This should prevent a race to the bottom of income tax and create a more level playing field for companies operating internationally.
State Secretary Van Rij (Finance): “I welcome this new step which will lead to a comprehensive approach against tax evasion. This is one of my spearheads in the fight against tax avoidance. Due to tax evasion, the costs of general provisions ultimately fall on citizens and businesses who pay their taxes (on time). This is unfair, especially since tax evaders benefit from taxpayer-funded facilities.
Creation
The global minimum tax (Pillar 2) is part of the OECD agreement on the revision of the international tax system. This 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, EU Member States reached unanimous agreement on this proposal. The directive must be transposed into national law by 31 December 2023. The draft implementing law was submitted to a public consultation on the Internet in the Netherlands at the end of 2022. After processing the responses from this consultation, the bill has been submitted to the Council of State for an opinion.
The bill will be debated 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 ensure the effective implementation of the law. This is done, among other things, by setting up a Pillar 2 expertise team.