The Dutch Ministry of Finance has outlined the OECD’s new “Side-by-Side” Pillar 2 package, which introduces safe harbours, simplification measures, and revised treatment of tax incentives to recognise equivalent tax systems, reduce compliance burdens, and prevent double taxation for large multinational groups.
The Netherlands Ministry of Finance sent a letter to the House of Representatives on 5 January 2026 outlining the Side-by-Side arrangement for the Pillar 2 global minimum tax, which was recently agreed by the BEPS Inclusive Framework.
The letter outlines the key elements of the Side-by-Side package. This agreement establishes criteria for recognising certain national tax systems, specifically the US system, as equivalent to the Pillar 2 standards.
The framework introduces safe-harbour rules to prevent double taxation and simplifies administrative burdens through streamlined reporting.
Furthermore, it provides more favourable treatment for fiscally-driven incentives linked to genuine economic activities, such as innovation and infrastructure investment.
Global minimum tax: The new side-by-side package
On 5 January 2026, the OECD Inclusive Framework (IF) reached an agreement known as the “Side-by-Side” package. This agreement aims to qualify certain tax systems as equivalent to the Pillar 2 global minimum tax, which ensures multinational groups with a turnover of at least EUR 750 million pay an effective rate of at least 15%. The package introduces critical safe harbours, simplification measures, and updated treatments for tax incentives to maintain a stable international tax network.
The safe harbour framework: Side-by-Side and UPE
The “Side-by-Side” package introduces two primary safe harbours designed to prevent double taxation for groups already subject to robust, equivalent minimum tax systems.
1. Side-by-side safe harbour
This rule provides an exemption from top-up tax under the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) for all domestic and foreign profits of multinational groups whose ultimate parent entity (UPE) is located in a qualifying jurisdiction.
To qualify, a jurisdiction must meet strict criteria for both its domestic and foreign tax rules:
- Domestic robustness: The jurisdiction must have a statutory corporate tax rate of at least 20%, a domestic minimum tax of at least 15% based on commercial accounts, and no material risk that effective rates will fall below 15%.
- Foreign robustness: The system must apply to both active and passive foreign income of subsidiaries and include mechanisms to address base erosion and profit shifting (BEPS).
The Inclusive Framework has already concluded that the United States tax system meets these conditions. Consequently, US multinational groups are exempt from Pillar 2 top-up taxes on their domestic and foreign profits, though they must still pay local domestic top-up taxes in other jurisdictions where they operate.
2. Ultimate parent entity (UPE) safe harbour
This safe harbour specifically addresses the domestic activities of a multinational group whose UPE is in a jurisdiction with a qualifying domestic tax system. It ensures that the UTPR does not apply to the jurisdiction of the UPE. This measure effectively replaces the temporary UTPR safe harbour, which expires at the end of 2025, but imposes stricter eligibility conditions.
Simplification measures and the one-year extension
To reduce the administrative burden on businesses and tax authorities, the package includes significant simplification measures.
- Extension of the temporary CbCR safe harbour: The temporary Country-by-Country Reporting (CbCR) safe harbour is extended by one year. It now applies to reporting years starting on or before 31 December 2027. This rule allows groups to use CbCR data and financial reporting to calculate their effective tax rate (ETR); if the ETR is at least 16% (for 2025) or 17% (for 2026 and 2027), no top-up tax is due.
- Permanent simplified ETR safe harbour: Starting in 2027, a new permanent safe harbour will be introduced. This allows the ETR to be calculated directly from financial statements with a limited number of adjustments, significantly reducing complexity. If this simplified calculation shows an ETR of at least 15%, no further Pillar 2 top-up tax applies.
Favourable treatment of tax incentives
The package introduces the substance-based tax incentive safe harbour, which expands the favourable treatment of certain fiscal regulations under Pillar 2. This recognises that tax incentives remain a legitimate tool for national economic policy, particularly for innovation and sustainability.
The government plans to implement the package through a separate legislative proposal, with the aim of submitting it to the lower house of parliament before the summer of 2026.
A stakeholder consultation will be conducted prior to submission.
