NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
The Undertaxed Payments Rule The Undertaxed Payments Rule functions as a back - stop rule, in addition to the Income Inclusion Rule. The Undertaxed Payments Rule applies in situations where, for example, a group is based in a non-EU country and that country does not impose the mini - mum rate. The share of the top-up tax is calculated based on a formula proportionate to the relative share of assets and employees. The Qualified Domestic Minimum Top-Up Tax In addition, the Netherlands opted to include the QDMTT rule, whereby any top-up tax to be paid by Dutch resident entities with an effective tax rate of less than 15% that are part of an in-scope group, will be collected by the Netherlands (instead of by the ultimate parent entity in another jurisdiction). Pillar Two may substantially impact the sovereignty of states as regards the taxation of business profits and their ability to employ an international tax policy based on the principle of “capital import neutrality”. In addi - tion, the implementation of Pillar Two will most likely lead to a higher administrative burden as the effective tax rate should be determined in each jurisdiction in which a multinational is active. On 5 January 2026, the so-called “side-by-side” package was published by the OECD. The package contains – in short – measures pursuant to which cer - tain tax regimes may, subject to certain conditions being met, be qualified as equivalent to Pillar Two and introduces several safe harbours. On 12 January 2026, the European Commission acknowledged the side-by-side package and confirmed its application with regard to the EU Pillar Two Directive. The Neth - erlands has indicated that the side-by-side package will be set out in a separate legislative proposal and is expected to be submitted to the House of Repre - sentatives before the summer of 2026. 9.3 International Tax International taxation, especially over the last decade, has gained a high public profile due to extensive cov - erage of – alleged – aggressive tax planning in leading Dutch newspapers and other media, as well as the exposure generated by NGOs such as Oxfam Novib and Tax Justice.
Furthermore, the government has investigated the extent to which group companies are breaking up ( opknippen ) activities in order to obtain tax benefits, specifically the benefit arising from the multiple appli - cation of the low tax rate levied on the first part of a taxpayer’s profit. As a result, the first bracket on which Dutch corporate income tax is levied was low - ered in 2023 (and still applies for 2026) to 19% over the first EUR200,000 (instead of 15% over the first EUR395,000 in 2022). 9.2 Government Policy and Objectives Approach The central aim of the Dutch government is to find a balance between, on the one hand, ending aggressive international tax planning by promoting transparency and making rules abuse-proof, and, on the other, not harming the Dutch economy and thus seeking to take measures that are in step with international develop - ments, thus avoiding unilateral measures that might disproportionately harm Dutch corporations, and to establish favourable Dutch tax regimes to safeguard the attractive business and investment climate. The Dutch government has announced that it will fully commit to the rules of Pillar One and Pillar Two. Pillar One may substantially impact the allocation of tax rev - enues to jurisdictions. Pillar Two, as implemented in Dutch domestic law as of 1 January 2024 following the EU Pillar Two Directive, introduces certain technical rules to ensure the effective tax rate of 15%, the so- called “Income Inclusion Rule”, the so-called “Under - taxed Payments Rule” and the so-called “Qualified Domestic Minimum Top-up Tax” (QDMTT) rule. Pillar Two The Income Inclusion Rule In short, the Income Inclusion Rule applies to a parent entity in the Netherlands in respect of low-taxed group entities (“constituent entities”) to bring taxation in line with the minimum effective tax rate of 15%. Under the Income Inclusion Rule, the minimum effective tax rate is paid at the level of the ultimate parent entity, in proportion to its ownership rights in subsidiaries that are taxed at a low effective tax rate (ie, lower than 15%). Briefly stated, the effective tax rate is calculated by dividing the corporate tax due by the net qualifying income.
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