Tax & Legal 21 February, 2024

Pillar 2: The new Minimum Tax Law 2024 

Crowe Peak/ Knowledge Hub/ Tax & Legal/

Pillar 2: The new Minimum Tax Law 2024 

The recently enacted Minimum Tax Law 2024 has significant implications for Dutch companies and requires careful assessment and planning. This new law brings a wave of change, requiring organizations of various sizes and compositions to respond to a new minimum tax rate. We are happy to  explain what this entails. 

What is Pillar 2? 

Pillar 2, also known as the Minimum Tax Law 2024, came into effect on December 31, 2023, in the Netherlands. Under this law, Dutch entities that are part of a large group must assess whether they are subject to an effective tax rate of at least 15%, as they could otherwise be confronted with an additional tax assessment. 

When and to whom is Pillar 2 applicable? 

Entities that are part of a group with a consolidated turnover of at least €750 million fall under Pillar 2. However, if the consolidated group turnover currently does not exceed €750 million, this does not automatically mean that these entities are exempt from the new Minimum Tax Law 2024. To determine if the threshold has been exceeded, the past four years should be reviewed. If in two of those four years the consolidated group turnover exceeds €750 million, a Dutch entity is within scope of  the Pillar 2 regime. Therefore, it is necessary to monitor this threshold annually. 

Differences between Dutch corporate tax and Pillar 2 

Although the highest statutory corporate tax rate in the Netherlands is 25.8%, this does not automatically mean that Dutch companies are also subject to an effective tax rate of at least 15% under Pillar 2. This is because there are differences in calculation methods and tax bases between Pillar 2 and Dutch corporate income tax law. Further, while the calculation of Dutch corporate tax is based on the financial statements prepared in accordance with Dutch standards, the consolidated financial statements of the ultimate parent company are generally the starting point for a Pillar 2 calculation. 

Data collection for Pillar 2 implementation 

Collecting substantial (new) data is essential to assess the implications of Pillar 2. This data may not be readily available in taxpayers’ current IT systems, and may require a revision or replacement of IT systems. Additionally, collecting financial and personnel-related data is necessary for a Pillar 2 calculation. This process requires collaboration between various departments, including IT, Finance, and HR, and extends beyond the tax department. 

Questions regarding the new data collection or the calculation for Pillar 2? Our experts are happy to assist you

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What are the Pillar 2 compliance obligations? 

Entities falling under Pillar 2 must comply with various compliance obligations. Firstly, they must submit a notification or declaration within 18 months after the end of their first fiscal year. Subsequently, they must file the Pillar 2 tax return itself within 20 months after the end of that fiscal year. 

Temporary safe harbor rules  during the transitional period

There are temporary safe harbor rules exempting taxpayers from the obligation to make a full Pillar 2 calculation. However, these rules only apply during the transitional period for fiscal years beginning on or before December 31st, 2026, and ending before July 1st, 2028. It is important to closely follow these temporary safe harbor rules. Once taxpayers no longer qualify for the temporary safe harbor rules during the transitional period, they are required to undertake a full Pillar 2 calculation from that point onwards. This means that full compliance with Pillar 2 obligations may be required even during the transitional period without exceptions. 

Take the right steps  

Implementing Pillar 2 requires substantial preparation and collaboration between various departments within an organization. Crowe Peak’s tax advisors are experienced in international tax matters and can assist in assessing the implications of Pillar 2 for your organization. Feel free to contact us for an introduction meeting

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