Pillar Two 2026 Tax Plan
16/09/25
The Draft Bill Amending the Dutch Minimum Tax Act 2024 is part of the Dutch 2026 Tax Plan released on 16 September 2025 and introduces some technical changes to the Dutch Minimum Tax Act 2024 (Pillar Two), which has been in force in the Netherlands since 31 December 2023. The measures also incorporate some supplemental rules in the administrative guidance of the Inclusive Framework on Base Erosion and Profit Shifting (IF) insofar as these have not already been included in the Pillar Two implementation process. Most measures have retroactive effect to 31 December 2023 and apply to fiscal years beginning on or after 31 December 2023. The remaining measures will enter into force as of 31 December 2025.
What does this mean for your business?
The proposed legislative amendments are of relevance when your business falls within the scope of the Pillar Two legislation. Pillar Two refers to the 15% minimum company tax regime for large enterprises, introduced in various countries as of year-end 2023 including the Netherlands. The Netherlands implemented Pillar Two through the Dutch Minimum Tax Act 2024. The minimum tax rules also apply in Bonaire, Sint Eustatius, and Saba.
The draft legislative bill introduces several technical amendments to the Dutch Pillar Two legislation. Since the publication of the Pillar Two Model Rules by the Inclusive Framework on Base Erosion and Profit Shifting in 2021 and the related Commentaries on the Pillar Two Model Rules in 2022, 2023 and 2025, the Inclusive Framework has published several sets of supplementary administrative guidance in 2022, 2023, 2024, and 2025. Some of this guidance has already been incorporated into Dutch implementation legislation, while other parts have not. The bill also incorporates elements from the guidance issued in December 2023, June 2024, and January 2025, insofar as these do not merely provide interpretative clarification and require a statutory basis, and have not already been included in Dutch implementation legislation.
Pillar Two poses a compliance challenge for businesses. The proposed amendments may give rise to more stringent compliance costs and/or an increase or decrease in the top-up taxes provided for in the Pillar Two legislation. It is advisable to further map out the implications of the proposed measures for your company.
15% minimum tax level for large enterprises (Pillar Two)
Since the end of 2023, several countries have been working on the introduction of a global minimum tax regime for large companies (annual turnover of 750 million euro or more) at a minimum effective tax rate of 15% per jurisdiction. For the calculation of the effective tax rate, reference is made to the financial reporting standard used in preparing the consolidated financial statements of the ultimate parent entity. Over the past years, around 140 countries have reached political agreement on this within the Inclusive Framework on Base Erosion and Profit Shifting (IF), organised by the Organisation for Economic Co-operation and Development (OECD).
If the effective tax rate in a jurisdiction where the company operates with one or more group entities falls below the minimum, a top-up tax will be levied to ensure the politically agreed upon minimum rate of 15%. The top-up tax is levied on local group entities on the basis of internationally agreed mechanisms. Top-up taxation of low-taxed domestic group entities may primarily be based on the so-called qualifying domestic minimum top-up tax. Otherwise, top-up taxation with regards to low-taxed foreign subsidiaries takes place according to the so-called income inclusion rule in the hands of the parent entity. As a safety net, a top-up tax applies in subsidiary entity jurisdictions with regards to low-taxed foreign parent entities in the form of the so-called undertaxed profits rule (generally as of year-end 2024).
Flow-through entities and hybrid entities
The administrative guidance issued by the IF in June 2024 provides further definitions of so-called flow-through entities and hybrid entities for Pillar Two purposes. The guidance also sets out rules for the allocation of profits and losses, as well as for the allocation of relevant taxes of a flow-through entity. The draft legislative bill incorporates these rules into the Dutch Minimum Tax Act 2024. The measures enter into force retroactively as of 31 December 2023.
Different financial year for a non-consolidated constituent entity
The agreed administrative guidance issued by the IF in December 2023 provides that, if a non-consolidated group entity has a different financial year than the ultimate parent entity, the calculation of the effective tax rate for Pillar Two purposes should be based on the financial reporting period that ends during the financial year of the ultimate parent entity. The draft legislative bill incorporates this approach in the Dutch Minimum Tax Act 2024. The measure enters into force as of 31 December 2025.
Different book value Pillar Two versus financial reporting
For the calculation of the effective tax rate for Pillar Two purposes, the starting point is financial reporting. This also applies to the adjusted movements in deferred tax assets and deferred tax liabilities. In certain cases, however, the book value of assets or liabilities for Pillar Two purposes differs from the book value according to financial reporting. In such cases, the calculation of the adjusted movements in deferred tax assets and liabilities must be based on the book value for Pillar Two purposes. The draft legislative bill follows the approach set out in the administrative guidance of June 2024. The measures will enter into force as of 31 December 2025.
Deferred tax assets arising before the transition year due to a government arrangement or the introduction of a company tax
The administrative guidance issued by the IF in January 2025 provides for measures in response to the introduction by certain countries of government arrangements, whether combined with the introduction of a company tax. These arrangements interfere with the operation of the transition rules in the Pillar Two legislation for deferred tax assets created prior to the entry into force of this legislation. To prevent the utilization of deferred tax assets arising before the transition year because of a government arrangement or the introduction of a company tax leading to an unduly low effective tax rate in subsequent years, the guidance stipulates that such deferred tax assets cannot be considered for Pillar Two effective tax rate calculation purposes. A transitional arrangement is also provided. The measure also applies to the transitional CbCR safe harbour. The draft legislative bill adopts the approach set out in the January 2025 guidance in the Dutch Minimum Tax Act 2024. The measures will enter into force as of 31 December 2025.
Transitional CbCR safe harbour
The so-called Transitional CbCR safe harbour establishes that the top-up tax for constituent entities established in a country amounts to zero for certain financial years, provided that specific conditions are met. The OECD has provided further details on this temporary safe harbour rule in the administrative guidance of December 2023. The draft legislative bill stipulates that, in alignment with IF guidance, for payments arising from hybrid intra-group transactions, a correction must be made under certain circumstances (i.e., an anti-avoidance provision). These measures will enter into force as of 31 December 2025. In addition, it is provided that, for the application of this temporary safe harbour rule, the separate financial reporting prepared by a main entity for a permanent establishment may be used as a qualifying financial report for Pillar Two purposes. This measure enters into force retroactively as of 31 December 2023. The measures follow the approach set out in the December 2023 guidance.
Joint Ventures
The draft legislation provides that a group entity also includes a joint venture and the parties associated with the joint venture. This means that these group entities are subject to the qualified domestic minimum top-up tax if they are established in the Netherlands and the effective tax rate is below 15%. The effective tax rate for a joint venture is calculated on a separate basis, in alignment with Pillar Two model rules. The measure is intended to clarify the tax liability of these group entities and to align with the guidance as released by the IF. This measure enters into force retroactively as of 31 December 2023.
Entry into Force
The measures in the draft legislative bill will enter into force as of 31 December 2025, with most measures having retroactive effect to 31 December 2023. The measures will then apply, respectively, to financial years beginning on or after 31 December 2025 and 31 December 2023.
The Dutch government considers the introduction of the legislative amendments with largely retroactive effect to the end of 2023 to be justified, i.e., insofar that it does not consider this objectionable for taxpayers. The IF-guidance now being codified was published after the entry into force of the Dutch minimum tax legislation. The Dutch government aims to incorporate these into legislation as quickly as possible, in order to prevent mismatches with foreign countries, legal uncertainty, and possible double (non-)taxation. Moreover, the minimum tax legislation of the Netherlands is subject to an international peer review process, in which prompt incorporation of the guidance is important for the qualifying status of the minimum tax rules involved.
No retroactive effect has been granted to the following specific measures in the bill:
- The measures for determining the GloBE Income or Loss and the covered tax of a constituent entity, in cases where the assets, liabilities, income, expenses, and cash flows of that constituent entity are not included in the consolidated financial statements and the financial year of that constituent entity differs from that of the ultimate parent entity.
- The amendment to the measure that determines what is meant by net tax expense for the purpose of determining the GloBE Income or Loss of a constituent entity.
- The measure relating to the determination of book value in the case of an impairment of assets or liabilities.
- The measure that regulates when a different book value must be used for the calculation of adjusted movements in deferred tax assets and liabilities than the book value used in financial reporting.
- The measure for deferred tax assets arising before the transition year because of a government arrangement or the introduction of a company tax.
- The measure that provides that the utilization of the deferred tax assets mentioned directly above is not to be included in the determination of the simplified covered taxes for the application of the Transitional CbCR safe harbour.
- The measure relating to the Transitional CbCR safe harbour, whereby payments arising from intra-group transactions are, under certain circumstances, treated as interest for both the payer and the recipient based on qualifying financial reporting.
- The amendment in the draft legislative to the measure relating to the turnover threshold in the event of a merger of two or more groups.
These measures will enter into force on 31 December 2025.
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