On 14 June 2021, the Dutch State Secretary of Finance sent a letter to the Dutch Parliament setting out his view on (i) the political agreement reached by the G7 countries on global tax reform and (ii) the next meeting of the OECD/G20 Inclusive Framework on BEPS (“Inclusive Framework”) in which a similar agreement should be reached within a wider group of countries.
The G7 Tax initiative
Since 2017, more than 135 member countries of the Inclusive Framework have been working on an approach – ‘the two pillar approach’ – to address taxation issues arising from the digitalization of the economy. This resulted in the publication of so-called blueprints in October 2020 detailing Pillar One (new nexus and profit allocation rules) and Pillar Two (global minimum tax rules). Driven by the US, updated and simplified versions of these blueprints formed the starting point for the G7 political discussions.
Following these discussions, on 5 June 2021 the G7 finance ministers reached a political agreement on global tax reform including the reallocation of a share of the global residual profit of the world’s largest businesses (the initial blueprint was focused on businesses providing “automated digital services”) to market countries (Pillar One), and a minimum effective tax rate of at least 15% in each country in which a business operates (Pillar Two).
The Inclusive Framework aims to reach an agreement on both Pillars – as agreed upon by the G7 countries – during the next meeting, which will be held on 30 June and 1 July 2021.
Response of the Netherlands
As a member of the Inclusive Framework, the Dutch State Secretary of Finance indicated in his letter that the Netherlands generally supports the political agreement reached by the G7. The goal of the Netherlands at the upcoming Inclusive Framework meeting is to reach an agreement with all involved countries on both Pillars. If – contrary to his current expectations – the Inclusive Framework does not lead to a political agreement, the Dutch State Secretary wishes to work on a joint approach on both initiatives within the EU. Both Pillars involve technical and complex aspects, and the Netherlands will strive at the next meeting to simplify the measures as far as possible to ensure an efficient execution once implemented. Regarding the agreed minimum rate for Pillar Two of 15%, the Dutch State Secretary indicates that it is a good starting point for further discussions, but that in order to maintain certain flexibility in reaching an agreement within the Inclusive Framework, he does not want to be pinned down too much on this specific rate.
The Netherlands and Tax avoidance
The Netherlands has taken various measures the past few years to combat tax avoidance. Implementation of the ‘regular’ hybrid mismatch rules, the ‘reverse’ hybrid mismatch rules (as of 1 January 2022), alongside the introduction of a conditional withholding tax on interest and royalties, and dividends (as of 1 January 2024), are just a few examples of recent measures in this respect.
Stibbe contributes Dutch chapter to Chambers Tax Controversy 2021
Lastly, we are proud to share with you the Dutch chapter of the Chambers and Partners Tax Controversy 2021, written by Reinout de Boer, Michael Molenaars, Rogier van der Struijk and Mieke Lavreysen. The chapter covers inter alia developments in tax controversies, tax audits, administrative and judicial litigation and alternative dispute resolution mechanisms in the Netherlands.