Tax Accounting impact 2026 Tax Plan

On Budget Day 2025, the Dutch government announced several tax law changes as part of the Dutch 2026 Tax Plan. In this publication, the tax accounting considerations of these changes are being addressed. In addition, we also outline a couple of tax accounting considerations related to the technical Pillar Two Questions and Answers document that was recently published by the Dutch tax authorities on 2 September 2025 (‘Q&A Document’).

In addressing the tax accounting considerations, we take the International Financial Reporting Standards (IFRS) as the main applicable financial reporting framework.

Announced measures related to the Dutch Corporate Income Tax Act

This year, the 2026 Tax Plan does not contain significant changes in relation to the Dutch Corporate Income Tax Act (‘CITA’). However, some measures related to the CITA may still be developed later in the legislative process and might lead to tax accounting implications. If these changes occur, we will address the relevant tax accounting considerations. Here you may find an overview of the measures of the 2026 Tax Plan.

Announced measures related to the Dutch Pillar Two legislation

The 2026 Tax Plan includes a draft legislative bill amending the Dutch Minimum Tax Act (‘DMTA’) and introduces some technical changes to the DMTA (also known as ‘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 (‘AG’) as issued by the OECD in December 2023, June 2024 and January 2025. Most measures have retroactive effect to 31 December 2023 and apply to fiscal years beginning on or after 31 December 2023. A couple of other measures will enter into force as of 31 December 2025. Also read our Tax News article ‘Pillar Two 2026 Tax Plan’.

In this part of our publication, we focus on three proposed technical changes of the draft legislative bill from a tax accounting point of view.

1. Divergences between Pillar Two and financial accounting carrying values

The draft legislative bill introduces guidance on how MNE Groups should compute the total deferred tax amount for Pillar Two purposes in cases where the financial accounting and Pillar Two carrying values and the Deferred Tax Assets/Liabilities (‘DTAs/DTLs’) determined therefrom diverge. For these cases, the amendments prescribe that the relevant deferred tax amount for Pillar Two purposes should be computed based on the Pillar Two carrying value, instead of the financial accounting carrying value. The draft legislative bill follows the approach set out in the June 2024 AG. The measures will enter into force as of 31 December 2025 (so no retroactive effect to 31 December 2023).

For IFRS purposes, the abovementioned amendment does not change the amounts of DTAs and DTLs that are currently reported in the financial statements. For financial reporting purposes, deferred taxes related to temporary differences are still determined on the basis of the financial accounting carrying value vis-à-vis the tax base. For Pillar Two purposes, the deferred taxes are calculated on the basis of the Pillar Two carrying value vis-à-vis the tax base (main rule). Consequently, MNE Groups need to have a (separate) administration to keep track of their relevant deferred taxes for both financial accounting and Pillar Two purposes.

Although not explicitly mentioned in the amendments, the June 2024 AG does emphasize that the determination of the deferred taxes based on the Pillar Two carrying values does not replace the application of the relevant financial reporting standard. For example, if IAS 12 does not allow for the recognition of a DTA or DTL due to the application of the Initial Recognition Exemption, then no deferred tax should be considered for Pillar Two purposes (exception to the main rule), except in cases where the Pillar Two rules specifically create a Pillar Two DTA (exception to the exception). This combination of highly technical financial reporting and Pillar Two concepts is expected to create an additional layer of complexity in practice.

2. DTAs that are established as a result of a governmental arrangement or the introduction of a CIT system

The draft legislative bill also introduces an anti-abuse provision that denies certain DTAs that are established in a jurisdiction in the period between 30 November 2021 and ‘Transition Year’ as a result of a governmental arrangement or the introduction of a CIT system for the purpose of Pillar Two ETR calculations. The Transition Year for a jurisdiction is the first fiscal year that the MNE Group comes within the scope of the Pillar Two rules in respect of that jurisdiction.

As a result, any deferred tax expenses related to the reversal of such DTAs would not be considered in the computation of the total deferred tax amount for Pillar Two purposes going forward. The draft legislative bill also provides for a transitional arrangement whereby potentially 20 percent of the original DTA amount can still be considered in the computation of the total deferred taxes for Pillar Two purposes if several conditions are met. The draft legislative bill follows the approach set out in the January 2025 AG. The measures will enter into force as of 31 December 2025 (so no retroactive effect to 31 December 2023).

Since the DTAs in scope of this anti-abuse provision would not have any value (or at best, 20 percent of the original DTA amount) from a Pillar Two perspective and therefore may trigger a Pillar Two Top-up Tax payable, it could be questioned whether a reporting entity is required to reflect this in the measurement of the same DTAs that are currently reported in the financial statements.

A similar question was raised as part of the proposed amendments to IAS 12 back in 2023. On May 2023, the International Accounting Standards Board (‘IASB’) issued Amendments to IAS 12 - International Tax Reform – Pillar Two Model Rules and introduced a temporary mandatory exception to recognising and disclosing information about DTAs and DTLs related to Pillar Two income taxes (IAS 12 paragraph 88A). In addition, the IASB clarified that an entity would not remeasure deferred taxes to reflect Pillar Two income taxes it expects to pay when recovering or settling a related asset or liability because the temporary mandatory exception applies to DTAs and DTLs related to such income taxes. For additional details, please refer to FAQ8 of our global IFRS tax accounting FAQ on Pillar Two.

As such, for IFRS purposes, the abovementioned amendment also does not change the amounts of DTAs that are currently reported in the financial statements.

3. Tracking DTLs on an aggregate basis

The DMTA (and the OECD Pillar Two Model Rules) includes a so-called DTL Recapture Rule to effectively exclude, from the Adjusted Covered Taxes, deferred tax expenses related to certain DTLs that do not reverse within a period of five years. Under the DTL Recapture Rule, DTLs that are not reversed within five years from the initial year when they were originally recognised (e.g., Year 1) will result in a recomputation of the Pillar Two ETR of that initial year excluding the deferred tax expense amounts. Consequently, any Pillar Two Top-up Tax payable resulting from this recomputation will be due in the year when the recomputation is performed (Year 6).

For the purpose of the DTL Recapture Rule, MNE Groups would need to track the reversal of the DTLs on an item-by-item basis under Pillar Two. To reduce the administrative burden of this rule, the draft legislative bill includes a provision where a company may track DTLs on an aggregated basis, rather than an item-by-item tracking or based on a single general ledger account. The draft bill also introduces an election to exclude the corresponding deferred tax expense related to a DTL on an aggregated basis from the computation of the total deferred tax amount for Pillar Two purposes in the year in which the DTL is accrued. The draft legislative bill follows the approach set out in the June 2024 AG. The measures have retroactive effect to 31 December 2023 and apply to fiscal years beginning on or after 31 December 2023.

From an IFRS perspective, the abovementioned amendment does not change the amounts of DTLs that are reported in the financial statements. This is because of the temporary mandatory exception to recognising and disclosing information about DTAs and DTLs related to Pillar Two income taxes (IAS 12 paragraph 88A).

In addition, if a reporting entity expects that a DTL that is accrued in Year 1 will result in a Pillar Two Top-up Tax in a future year (Year 6) under the mechanics of the DTL Recapture Rule, a liability should be recognised for the estimated Pillar Two Top-up Tax payable in the financial statements of Year 1. Consequently, the top-up tax liability should be initially classified as non-current (in line with IAS 1 paragraph 69, IFRS 18 paragraph 101). For additional details, please refer to FAQ9 of our global IFRS tax accounting FAQ on Pillar Two.

Technical Pillar Two Q&A document Dutch tax authorities

In the remaining part of this news alert, we address a couple of Q&As that are included in the Q&A Document from a tax accounting point of view. Find here our Tax News article ‘Q&A document Dutch tax authorities on minimum taxation’.

1. Recharges of Pillar Two taxes

The Q&A Document mentions that the DMTA governs which group entity is considered to be liable to pay the Pillar Two Top-up Tax in the Netherlands (‘Pillar Two Taxpaying Entity’) and that the law itself does not provide for a rule under which the Pillar Two Taxpaying Entity obtains (financial) resources to pay the Top-up Tax in respect of another group entity. Consequently, it is up to the MNE Groups themselves to decide how the relevant Pillar Two Taxpaying Entity is being funded within the group. In addition, the Q&A document re-emphasizes that each group entity (primarily the group entities located in the Netherlands) of a Pillar Two in-scope MNE Group are jointly and severally liable for any Dutch Qualified Minimum Top-up Tax (‘QDMTT’) due.

From a tax accounting perspective, Pillar Two Top-up Tax expense is an income tax within the scope of IAS 12 and is recognised as an income tax expense in the separate financial statements of the Pillar Two Taxpaying Entity. For cases where the Pillar Two Taxpaying Entity is liable to pay a Top-up Tax with respect to a low-taxed subsidiary under the application of the Income Inclusion Rule (‘IIR’), the relevant subsidiary entity that gives rise to the IIR Top-up Tax should not recognise a tax expense. However, there may be alternative approaches. For additional details, please refer to FAQ1 of our global IFRS tax accounting FAQ on Pillar Two.

In addition, in cases where each reporting entity of a MNE Group is jointly liable for the QDMTT, the entity should account for the QDMTT in the same way as it would account for CIT as part of a tax group. For additional details, please refer to FAQ12 of our global IFRS tax accounting FAQ on Pillar Two.

2. Prior year tax adjustments related to a pre-Pillar Two Year

In the Q&A document, the Dutch tax authorities mention that Article 7.6 DMTA (the Dutch equivalent of Article 4.6.1 of the OECD Pillar Two Model Rules) only governs prior year adjustments to covered taxes after the GloBE Information Return (‘GIR’) for those relevant prior years have been filed. The Dutch tax authorities have not explicitly addressed the question how to deal with prior year tax adjustments related to a pre-Pillar Two year.

In view of Pillar Two, having an accurate tax provisioning process remains important. While there is currently no explicit guidance on the treatment of prior year tax adjustments related to a pre-Pillar Two Year under the Pillar Two detailed computations from a DMTA perspective, these prior year tax adjustments are considered for the purpose of the Simplified ETR Test under the Transitional CbCR Safe Harbour. As such, any (material) amounts of return to provisions/prior year tax adjustments causes volatile results within the Simplified ETR Test (with the potential risk of not meeting this test).

3. Disclosure of unrecognised DTAs

Under the DMTA (and the OECD Pillar Two Model Rules), unrecognised DTAs stemming from a pre-Pillar Two Year are also considered in the computation of the Pillar Two ETR if these are disclosed in the financial accounts. In the Q&A Document, the Dutch tax authorities mention that the existence of unrecognised DTAs may also be substantiated through other evidence such as information that is being used for the preparation of the consolidated financial statements.

Pursuant to IAS 12 paragraph 81(e), a reporting entity shall disclose the amount (and expiry date, if any) of deductible temporary differences, unused tax losses and unused tax credits for which no DTA is recognised in the financial statements. The DMTA and the OECD Pillar Two Model Rules primarily rely on this disclosure statement for identifying any unrecognised DTAs to be imported into the Pillar Two regime. In the Q&A Document, the Dutch tax authorities clarify that other evidence may also be considered to support the existence of unrecognised DTAs in this context.