Pillar 2

What is Pillar 2 ?

Pillar 2 is part of the global tax reforms initiated by the OECD and the G20. The goal of this law is to introduce a global minimum tax rate of 15% for multinational enterprises to combat tax avoidance and promote fair competition.

Background and Timeline

The OECD/G20 Base Erosion and Profit Shifting (BEPS) 2.0 initiatives have led to the development of Pillar 2. The timeline for implementing this legislation is set for 2024, with countries worldwide committing to the introduction of the minimum tax rules. The Netherlands plays an active role in this international cooperation and is working on the national implementation of these rules.

Operation & Implementation for the Netherlands

The implementation of Pillar 2 in the Netherlands requires adjustments to national legislation to comply with international agreements. The legislation focuses on taxing profits of multinational enterprises that fall below the minimum rate.

Income Inclusion Rule

The income inclusion rule is a mechanism that ensures the parent company of a multinational group pays tax on the profits of foreign subsidiaries that fall below the minimum tax rate.

Under-Taxed Payments Rule

The under-taxed payments rule comes into effect when profits of foreign subsidiaries are not sufficiently taxed. In that case, the difference is taxed at the parent company level.

Domestic Top-Up Tax

The domestic top-up tax is an additional tax that can be levied by the countries where the subsidiaries are located if the profits there do not meet the minimum rate.

5-Step Plan to Calculate Top-Up Tax

1. Identify the entities within the multinational group.
2. Determine the effective tax rates for each entity.
3. Calculate the tax due based on the minimum tax rate.
4. Apply the income inclusion rule and under-taxed payments rule.
5. Implement the domestic top-up tax if applicable.

Need Advice?

We offer comprehensive support for the implementation of Pillar 2. Our specialists advise on the impact on your organization and help develop strategies to comply with the regulations. Additionally, we assist with the implementation of necessary changes, ensure compliance and reporting, and provide training for your tax team. With our expertise, we help you navigate the safe harbor rules, reducing administrative burdens and providing certainty. Benefit from our in-depth knowledge to effectively meet the new tax requirements.

Contact one of our advisors for more information and to understand how Pillar 2 impacts your organization.