A minimum corporation tax bill for large corporations was submitted to the House of Representatives of the States General on May 31, 2023. The document sets the minimum effective CIT rate at 15%, the qualifying condition is a minimum income of at least EUR 750 million.
Extended obligations under CIT (Corporate Incom Tax) arise only if the corporate group in the Netherlands to which the foreign company belongs pays tax at a rate of less than 15%. The additional tax rate will be determined by the formula:
The minimum corporate tax rate (15%) is the real tax rate in the country of incorporation of the subsidiary.
For example, a parent company in the Netherlands has a subsidiary in a low-tax/tax-free zone where the CIT rate is below 15% (for example, in Gibraltar, where the CIT is 12.5% from August 1, 2021). If the bill is approved, then under the new rules, the amount of additional tax will be 15% – 12.5% = 2.5%.
Why is there a minimum corporate tax for large corporations:
- active opposition to aggressive tax practices;
- reducing the influence of factors that make the transfer of profits to offshore and mid-shore jurisdictions profitable;
- leveling the factor of tax competition between countries with different CIT rates;
- effective counteraction to tax evasion;
- equalization of business conditions for large corporations and small companies.
Of course, the fact that the text of the document was submitted to the Dutch Parliament does not mean that from July 2023 the minimum corporate tax rate for large corporations begins to work. After the bill is approved in the House of Representatives, the bill will go to the Senate. If the First House of the Estates General approves the text, the bill will enter into force. Additional clarifications will be provided by the tax department of the Dutch Ministry of Finance (Ministerie van Financiën) in the near future.