On June 30, 2023 the Dutch Minister of Finance sent to the Dutch parliament an annotated agenda for the Eurogroup and Economic and Financial Affairs (ECOFIN) Council meetings that will take place on respectively July 13, 2023 and July 14, 2023. One of the agenda points the Dutch Minister of Finance discusses is the reallocation of taxing rights (Pillar 1). In this respect the Dutch Minister of Finance states a.o. the following:

The ECOFIN Council will discuss the state of affairs in the negotiations on Pillar 1.

On December 15, 2022 the ECOFIN Council reached an agreement on Pillar 2. The European Council emphasized the EU's determination to implement both Pillar 1 and Pillar 2 according to the timeframe as set by the Inclusive Framework (IF). The European Commission (the Commission) has been asked to monitor developments and negotiations on Pillar 1 and to report to the ECOFIN Council before June 30, 2023 on the progress made. During the ECOFIN Council, the Member States will discuss progress on Pillar 1.

In October 2021, it was agreed that Pillar 1 would come into force in 2023. Given the complexity of Pillar 1, this objective has proven to be unattainable.

Pillar 1 consists of two parts: “Amount A” and “Amount B”. Amount A will apply to the largest and most profitable multinationals worldwide, being groups with a turnover of more than EUR 20 billion and a profit margin (profit over turnover) of more than 10%. On the basis of Amount A, additional taxing rights are allocated to countries where these companies have many buyers or users. Other countries will have to give up taxing rights to avoid that double taxation of the reallocated profits occurs. The intention is that the latter will be the countries to which under the current rules a lot of profits are allocated. Amount B contains a simplification of the rules for determining the profit allocation for certain marketing and sales activities. Amount B will apply to all (multinational) companies and is therefore not dependent on the aforementioned turnover and profit margin limits of Amount A.

For the entering into force of Amount A, a multilateral convention or MLC will be drawn up. The technical negotiations on MLC are currently and continuously taking place. The IF will meet on 10 to 12 July 2023 and it is expected that an agreement will be reached during that meeting. The Dutch parliament will be informed about the results after the IF meeting. After an agreement has been reached on the multilateral convention, countries will be asked to ratify the convention. After it has been signed by the Dutch Government, the multilateral convention will be submitted to the Dutch parliament for approval. National legislation will then also be drafted. The Commission is expected to present a proposal for a directive in order to ensure equivalent implementation within the EU.

As was reported to parliament on several occasions, the Dutch government strongly supports the overhaul of the international tax system, Pillar 1 and Pillar 2, and the Dutch government therefore hopes that on short notice an agreement can be reached within the Inclusive Framework. The Netherlands can listen to the feedback from the European Commission and emphasize the importance of the implementation of Pillar 1 and Pillar 2.

No mentioning of the proposal for an unshell Directive

Another thing we noticed that just as on the meeting page as available on the website of the Council of the European Union also the annotated agenda that the Dutch Ministry of Finance sent to the Dutch parliament again does not mention the proposal for an unshell Directive.

The annotated agenda that the Dutch Minister of Finance sent to the Dutch parliament on June 30, 2023 can be found here. (only available in the Dutch language)

A Progress Report on Pillar One from the European Commission to the Council of the EU (dated June 30, 2023) can be found here on the website of the European Council.

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