On September 4, 2023 the Dutch Secretary of State for Finances has sent a sent a summarization of the July 10-12 meeting of the Inclusive Framework (the IF) to the Dutch House of Commons. The letter gives some interesting insights in what has been discussed and on some of the views of the outgoing Dutch Government. In this article we focus on some of the interesting remarks made by the Secretary of State in his letter to the House of Representatives. The article is therefore not a full translation of the 5 page letter of the Dutch Secretary for Finances.


Result with respect to Amount A

The countries in the IF have negotiated and drafted a multilateral treaty for Amount A. The treaty contains all the elements that are necessary to make the new system work. In terms of content and text the treaty is as good as finished. According to the Dutch Secretary of State that is an important milestone for Amount A.

During the IF meeting of July 10, 11 and 12 it became apparent that a number of countries could not yet agree to some specific topics. Work is currently underway to resolve these remaining discussion points. In addition, editorial adjustments still need to be made to prepare the treaty for signing. As a result, the final text of the multilateral treaty is not yet publicly available.


Follow-up process with respect to Amount A

What is special about the treaty is that it can shift taxation rights on the profits of a multinational between several countries. The system therefore only works if sufficient countries participate that give up their taxing rights and prevent double taxation. Therefore, the treaty will only enter into force once a minimum number of countries have ratified it. (ITP: unfortunately the Secretary of State does not give an indication of what this minimum number of countries is that have to ratify the treaty for it to enter into force)  Because several countries are involved, each with their own political dynamics, it is difficult to predict exactly when Amount A will come into effect. The goal is for Amount A to come into effect in 2025.


Amount B of Pillar 1

Amount B aims to simplify the rules for routine marketing and sales activities. A global “standard” comparability study is being drawn up for this purpose.

During the IF meeting of 10, 11 and 12 July, no consensus was reached on all aspects of the design of Amount B. It was therefore decided to first continue working on a number of topics and to obtain input for this through a public consultation. These topics include the definition of the activities that fall under Amount B, the height of the remuneration for these activities, whether or not to include digital assets and specific adjustments for countries within certain geographic markets.

The IF is scheduled to publish a final report on Amount B before the end of the 2023. In January 2024 the results could then be included in the OECD Transfer Pricing Guidelines. The Dutch Secretary of State for Finances notes that many countries consider the implementation of Amount A and Amount B to be part of the same agreement, so agreement on and finalization of Amount B is related to agreement on and finalization of Amount A.


Subject to Tax Rule (STTR) of Pillar 2

The STTR arranges that (developing) countries - notwithstanding the demarcation of tax rights as agreed in a tax treaty - may levy more (withholding) tax on certain payments if these payments are subjected to a statutory rate that is lower than 9% in the partner state where these payments are received. The STTR applies to interest, royalty and other payments (such as fees for services) paid between related persons (in particular group companies within the same multinational).

Countries within the IF have committed to, at the request of developing countries, include the STTR in their tax treaties with these countries if it appears that they subject the payments in question to a low tax rate. This impact of the STTR in tax treaties can be achieved via a bilateral treaty adjustment or via the STTR MLI. The STTR MLI can be signed as of October 2, 2023.

The Dutch government considers the STTR to be a justified treaty measure. when concluding tax treaties, based on their implicit assumption that these payments will be subject to a tax rate of a sufficient level in the other/recipient country, countries often appear willing to limit (withholding) taxes over the relevant payments when allocating tax rights. The STTR corrects the agreed limitation of taxing rights if this implicit assumption turns out to be incorrect.


Exploration of future priorities

Now that the elaboration of Pillars 1 and 2 is well advanced, during the IF meeting possible future priorities for the international tax system were being considered.

A panel discussion took place in which experts from academia, business, international organizations (IMF) and civil society organizations (OXFAM Novib) participated. Countries could then share their views. The topics that the OECD put forward to start explorating were: taxes & inequality, domestic resource mobilization to finance development, taxes & ESG (Environment, Social & Governance), global mobility, 'cleaning up' and simplifying' international profit tax following the Pillars and transparency.

The Netherlands has indicated that it is important to look forward to the challenges in the areas of climate, social inequality and the global mobility of labor and the super-rich. With regard to this increased global mobility, the Netherlands has indicated that it poses new challenges for the tax system, such as taxing capital and labor. The OECD has an important role in this, in the Inclusive Framework on Carbon Mitigation Approaches with regard to climate and in the Inclusive Framework on BEPS with regard to the international tax system. Specifically, the Netherlands has indicated that it is a priority to come to international agreements on the taxation of so-called “high net worth individuals”. With the increased mobility of people and the growing global wealth inequality, it is important to make global agreements on this matter. Some other countries confirmed this priority.

In addition, the Netherlands has called on the OECD to make agreements for cross-border workers that work from home. The Netherlands stated that it is important to prevent a race to the bottom in income tax regimes for attracting employees, such as expat regimes and the treatment of digital nomads.


The complete letter as sent by the Dutch Secretary of State for Finances to the Dutch House of Representatives can be found here. (Only available in the Dutch language)



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