The Netherlands Takes Steps to Implement Pillar Two Legislation

June 12, 20230


In a significant move to align with international tax standards, the Dutch Government has presented draft legislation to Parliament on May 31, 2023, to implement the BEPS 2.0 – Pillar Two global agreement within its domestic legislation. This legislative proposal follows a previous draft released on October 24, 2022, as part of a public consultation process. The Dutch implementation is structured as a separate tax law, distinct from the existing Dutch Corporate Income Tax Code. 


Adoption of the EU Directive:  

The Dutch proposal draws upon the EU Directive dated December 14, 2022, which outlines the implementation of the OECD Pillar Two agreement within the European Union. The EU member states are required to transpose this directive into their national legislation by December 31, 2023. By basing their implementation on the EU Directive, the Netherlands aims to harmonize its Pillar Two rules with other EU member states, ensuring consistent and coordinated efforts in tackling base erosion and profit shifting. 


Pillar Two Overview:  

Pillar Two introduces a pivotal change through the introduction of a 15% global minimum effective tax rate for businesses falling within its scope. The core elements of Pillar Two consist of two interconnected domestic rules: the Income Inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR). Together, these rules are collectively known as the Global Anti-Base Erosion (GloBE) rules.  


Effective Dates and Dutch Approach:  

Aligned with the EU Directive, the Dutch Government proposes that the IIR becomes effective for financial reporting years starting on or after December 31, 2023, while the UTPR is slated to come into effect for reporting years commencing on or after December 31, 2024. Notably, the Dutch Government exercises an option provided by the EU Directive to introduce a Qualified Domestic Minimum Top-up Tax (QDMT). Under this provision, the Dutch Government will collect top-up tax on the excess profit of Dutch constituent entities that are part of multinational groups within the Pillar Two scope. The draft legislation also includes a domestic version of the IIR.  


Safe Harbor Rules and Future Guidance:  

The legislative proposal incorporates Safe Harbor rules in accordance with the guidance issued by the OECD/G20 Inclusive Framework on December 15, 2022. The legislation also acknowledges the potential for further guidance from the OECD, which may impact the Dutch model rules in subsequent stages, and consequently, necessitate future adjustments to Dutch legislation or regulations.  


Timing and Next Steps:  

To meet the deadline set by the EU Directive, the bill must be transposed into national legislation by December 31, 2023. Presenting the bill to Parliament is the initial step towards this objective, and the legislation remains subject to further discussions and deliberations within the parliamentary process.  



The Netherlands is taking proactive measures to implement the OECD Pillar Two global agreement through proposed legislative changes. By introducing the IIR, UTPR, and QDMT, the Dutch Government aims to create a robust framework for ensuring fair taxation and combating base erosion and profit shifting. Finance and tax professionals should closely monitor the progress of the legislative process to remain informed of the implications and technical aspects of this proposed legislation.  

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