Pillar 2

Pillar 2, also known as the Global Minimum Tax, has significant implications for Dutch companies, especially if they are part of an international group. Pillar 2 requires careful assessment and planning. This new law represents a substantial change, necessitating organizations of various sizes and structures to adapt to a global minimum tax rate. Pillar 2 marks a significant shift in tax compliance for Dutch entities within large multinational groups. This law mandates that entities assess whether they meet a minimum effective tax rate of 15%. Failure to do so may result in additional tax assessments, fines and quite possibly an effect on the company’s ESG-reputation.

When and to whom is Pillar 2 applicable?

Entities belonging to a group with a consolidated turnover exceeding €750 million fall under Pillar 2. Even if the current turnover does not meet this threshold, reviewing the past four years is crucial. Exceeding the threshold in two of these previous years subjects the Dutch entity to the Pillar 2 regime, requiring annual monitoring.

Example application of Pillar 2

Consider company X Inc. paying an effective tax rate of 10% in its home country. Y BV, based in the Netherlands, is the parent company of this group. This can categorize X Inc. as low-taxed, triggering the effects of Pillar 2. In this case, there is a positive difference of 5%, with the minimum tax rate being 15% while the effective tax rate is 10%. Consequently, Y BV is subject to a top-up tax of 5% on the profits of X Inc.

Key differences from Dutch corporate tax

While the highest Dutch corporate tax rate is 25.8%, compliance with Pillar 2’s minimum tax rate of 15% requires understanding differences in calculation methods and tax bases. Pillar 2 calculations start from consolidated financial statements. These may differ from Dutch corporate income tax calculations based on local GAAP.

Data collection for Pillar 2 implementation

Effective Pillar 2 implementation necessitates new data collection, potentially requiring IT system revisions. Gathering financial and personnel data involves collaboration across departments beyond tax, including IT, Finance, and HR.

Download your Pillar 2 implementation steps guide

Seeking guidance on implementing Pillar 2? Download your guide here!

Compliant and effective management of transfer pricing documentation

Crowe Peak’s team of tax specialists is a team of experienced professionals with extensive expertise in local and international tax legislation. We provide personalized solutions designed to meet individual needs and circumstances. Kindly indicate the areas where support is needed in the contact form below, and one of our tax specialists will reach out to you directly.