News Update Tax & Transfer Pricing

Pillar Two is around the corner; what now?
2 January 2023

On 16 December 2022, the Council of the EU issued a press release announcing that the proposed directive on ensuring a minimum level of taxation for the largest corporations ("Pillar Two") had been adopted. The Organisation for Economic Co-operation and Development (OECD) had already agreed on the outline proposal for a directive on Pillar Two rules on 22 December 2021. As result of the unanimous adoption of Pillar Two, all EU Member States will proceed with the implementation of the Directive into their domestic legislation. The Netherlands was the first EU Member State to publish a consultation draft bill on the implementation of Pillar Two on 24 October 2022.

For more background on Pillar Two, we refer to our previous News Update of 10 November 2022 and the more extensive News Update of 24 December 2021.

What's changing?

The introduction of Pillar Two forces multinational enterprises (MNEs) to quickly adapt to the new legislation, and also means that they may have to reconsider their tax policies and strategies. In addition to the potentially significant impact on MNEs' overall tax burden, the rules also result in more onerous administrative procedures and require the use of state-of-the-art digital solutions. Pillar Two is envisaged to be implemented as a separate tax act and thus it is not expected to be part of the Dutch Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969). As for the profit calculation, commercial accounts prepared under the relevant accounting rules (e.g., IFRS, US GAAP) will be used as a basis. Furthermore, current IT systems may need to be upgraded to accommodate the needs of MNEs and to meet the additional compliance and filing obligations that Pillar Two entails. For instance, the IT systems should be sufficiently flexible and capable of collecting and processing the required data and of calculating the effective income and tax (including per entity) based on the new rules. In addition, tax policies must be reconsidered, as the traditional tax structures allowing MNEs to engage in tax arbitrage (i.e., to benefit from differences in tax rates between countries) will no longer deliver the desired benefits.

Going forward

The pace of developments regarding Pillar Two is accelerating and its implementation is just around the corner. Due to the complexity involved, the short time frame in which the draft bill was prepared, and some adjustments arising from the consolidation period, further improvements are expected before finalisation. Given the wide application of Pillar Two, the highly complex subject matter, and the requirements regarding companies' organisation and digital systems, it is advisable to monitor the situation closely and take measures in good time. Should you have any further questions, the Houthoff team would be happy to assist you!


If you have any further questions, please contact one of the members of the Houthoff Tax team.
Written by:
Sylvia Dikmans

Key Contact

Tax Lawyer | Partner