Background of Pillar I and Pilar II
The OECD/G20 Inclusive Framework introduced a two-pillar tax reform to address the taxation of multinational enterprises (MNEs). Pillar I reallocates taxing rights, particularly for digital and remote businesses, ensuring countries where MNEs have significant economic activity can tax a portion of profits. Pillar II introduces a global minimum tax rate of 15% to curb tax competition.
Amount B
Within Pillar I, Amount B simplifies the allocation of profits to taxpayers who perform routine marketing and distribution activities. These taxpayers no longer need to conduct a full comparability analysis for routine activities, but can instead apply a fixed return on sales using a simplified approach. Pillar B is particularly aimed at countries with limited publicly available information or limited tax administration capacity, and the implementation is optional.
Prevention of Double Taxation
While the Netherlands will not implement Amount B for Dutch taxpayers that perform certain marketing and distribution activities in the Netherlands, the application of Amount B in a foreign country may lead to double taxation. The Dutch Staatssecretaris van Financiën issued a decree on 04 December 2024 (effective 01 January 2025), which outlines how the Netherlands will prevent this double taxation. It only relates to covered jurisdictions (countries which have implemented Amount B and have a bilateral tax treaty with the Netherlands, a list of which will be published by the OECD) and works as follows:
- If a covered jurisdiction applies Amount B correctly to a related transaction and there is a tax treaty between that jurisdiction and the Netherlands, the Dutch tax authorities will eliminate any resulting double taxation by making a corresponding adjustment.
- If a request for mutual agreement procedures is filed regarding the application of Amount B by a covered jurisdiction, the competent authorities will apply the corresponding adjustment process to resolve any potential double taxation.
- The Dutch tax authorities will not impose corrections related to the compensation for routine marketing and distribution activities in a covered jurisdiction, provided Amount B has been correctly applied in that jurisdiction.
This applies to the profit allocation of group entities as well permanent establishments.
Closing considerations:
- MNEs should map if Amount B applies to them in certain jurisdictions and if there are any mismatches on intercompany transactions
- While the Netherlands has issued this decree to prevent double taxation, other countries may not have similar legislation in place.
Author: Igor Pinto, Senior Associate, TPA Global
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