Dutch Cabinet wants minimum 15% corporate tax to cut down tax avoidance; First in EU

The Cabinet announced draft legislation to ensure that multinational and domestic companies in the Netherlands with an annual revenue of at least 750 million euros always pay at least 15 percent corporate tax. The Minimum Tax Rate Act 2024 was sent on Wednesday to the Tweede Kamer, the lower house of the Dutch parliament.

It also aims to ensure that the Netherlands can levy taxes on a subsidiary of a Dutch company located in a tax haven. The proposal is part of an international agreement concluded in October 2021 by nearly 140 countries. The Netherlands is the first country in the European Union where legislation has been presented to parliament.

"Companies will only pay the new tax if the group to which those companies belong effectively pays too little profit tax in a country. This is determined by subtracting the effective tax rate in a country from the minimum tax rate of 15 percent. The minimum tax rate of 15 percent is an internationally agreed rate," the Ministry of Finance wrote in a statement.

The bill was designed to end competition between countries over corporate income tax rates. It will prevent countries from initiating a “race to the bottom” by offering lower tax rates to attract businesses. Moreover, the bill will make tax evasion through other countries more difficult.

In October 2021, 138 countries reached an agreement under the guidance of the Organisation for Economic Cooperation and Development (OECD). According to the most recent estimations of the intergovernmental organization, the measures should generate over 200 billion euros in tax revenue for governments.

Since the beginning of the year, companies in the Netherlands with profits up to 200,000 euros pay a 19 percent corporate tax, while companies with higher net profits pay nearly 26 percent.

State Secretary for Tax Affairs Marnix van Rij said he was "pleased with this new step leading to a global approach against tax evasion," highlighting this as one of his "main priorities."