The Netherlands State Secretary for Finance, in a letter to the parliament, stated that the global minimum tax would have limited effects on current tax incentives but highlighted that the newly introduced tax credits under Pillar Two could pose significant challenges.
Tax Incentives Under Pillar Two
The State Secretary noted that the minimum tax could affect policy objectives such as the innovation box, tonnage regime, and liquidation and cessation loss rules. These incentives can lower a company’s effective tax rate from 25.8% to below 15%, potentially leading to additional tax charges under the Pillar Two regulations. However, the State Secretary claims these incentives remain relevant because only some companies will surpass the EUR 70 million threshold, and the entities that fall under the scope of the above mentioned incentives often have activities taxed at the regular CIT rate.
Tax Credits Under Pillar Two
The State Secretary also indicated that tax credits under Pillar Two rules have minimal impact on companies’ effective tax rates because the tax rebates are included in qualifying income but not deducted from taxes paid. The Netherlands does not offer such credits, and the State Secretary opposes introducing them until the tax credits are compatible with EU state aid rules and budgetary effects are analysed.
Earlier, the Netherlands passed the Tax Plan for 2024 on 19 December 2023, which included the Pillar 2 global minimum tax and other tax measures.
