Netherlands and Germany agree to work together on minimum tax rate

On Wednesday, State Secretary for Finance Menno Snel and Germany’s Federal Minister of Finance Olaf Scholz agreed in Berlin to join forces in international talks on introducing a minimum tax rate.

A minimum tax rate will help combat tax avoidance. The Netherlands is one of the first countries to take action on this issue, by introducing a withholding tax on interest and royalties as of 2021.

‘The Netherlands is already planning to introduce a minimum withholding tax,’ said Mr Snel. ‘But international cooperation is necessary to prevent international tax avoidance. Because otherwise a company may continue to pay too little tax, but in another country. It’s in the Netherlands’ interests to work with other countries to ensure that practical measures are adopted that are fully transparent to businesses.’

As of 2021, companies based in countries with a corporation tax rate of under 9% will pay the Dutch tax authorities a 20.5% tax on any interest and royalties they receive from the Netherlands. The same will apply to companies in countries on the EU blacklist. This will prevent the Netherlands from being used for channelling funds to tax havens.

The aim is for countries to jointly agree a minimum rate of corporation tax. If a company in one country is taxed below the minimum rate, another country can also tax this company if it receives payments from that country. The Netherlands wants to work with Germany and France on more detailed plans.

Although all three countries consider a minimum tax rate to be a key tool in the fight against tax avoidance, their ideas on the most effective approach may differ. That is why it is important to hold talks on this matter. Mr Snel discussed the issue in Paris earlier this year.

During his visit to Germany, State Secretary Snel also invited Minister Scholz to join him in working towards greener taxes, such as an aviation tax and CO2 tax. The government is pressing for European agreements on aviation taxes with a view to achieving the Paris climate targets. In June, the Netherlands will host an international conference on introducing an aviation tax. The government has drawn up a bill for a national aviation tax, in case its efforts in the EU fail to achieve a satisfactory outcome.