March 8, 2019 (Updated on December 31, 2020)

On March 5, 2019, the Upper House (Eerste Kamer) of the Dutch parliament approved the Multilateral Convention to implement tax treaty-related measures to combat base erosion and profit shifting (also known as the Multilateral Instrument or MLI). Therefore, the ratification process is finalized. The Netherlands deposited the ratification instrument with the OECD on March 29, 2019. Therefore, the provisions of the MLI enter into force as of January 1, 2020. The MLI may affect existing Dutch tax treaties.

Positions of the Netherlands

The MLI is a multilateral tax convention designed by the OECD to combat base erosion and profit shifting (BEPS) by multinational enterprises to swiftly implement tax treaty-related BEPS measures and will be applied alongside the existing bilateral tax treaties and effectively changes these treaties.

The MLI entered into force on July 1, 2018, but the application to tax treaties of the jurisdictions that signed the MLI depends on the status of the domestic ratification process of the contracting jurisdictions.

The Netherlands submitted its MLI position during the signatory ceremony on June 7, 2017, listing its provisional reservations/notifications and included 82 tax treaties that it wishes to be covered by the MLI as Covered Tax Agreement (CTA).

The following categories of provisions in the MLI can be distinguished: (i) minimum standards, (ii) options (opt-in) and (iii) reservations (opt-out). The Dutch positions are as follows: with respect to the minimum standards, the preambles of the CTAs will be amended to clarify that the CTAs were concluded to eliminate double taxation without creating opportunities for non-taxation, a principal purpose test applies to all provisions in the CTA and a mutual agreement procedure will apply in tax disputes. The Netherlands did also opt-in for mandatory binding arbitration, but opted-out for the provision regarding the artificial avoidance of a permanent establishment status through commissionaire arrangements.

Impact on Dutch bilateral tax treaties

When the domestic ratification process has been finalized by both contracting jurisdictions, the MLI modifies the CTAs and has effect as of the first day of the next calendar year for withholding taxes (e.g. interest, dividends) and as of the new taxable period starting after a 6-month period for all other taxes.

The Netherlands deposited the ratification instrument with the OECD on March 29, 2019. Therefore, the provisions of the MLI modify the CTAs as of January 1, 2020.

We have compiled an overview that demonstrates the impact of the entry into force of the MLI with respect to Dutch CTAs. Whether your company is affected by the entry into force of the MLI can be assessed according to the below overview that is divided in the following categories (a) CTAs that are impacted by the MLI, (b) CTAs that are impacted by the MLI when the ratification process in the contracting jurisdiction is finalized and (c) bilateral tax treaties that are not impacted by the MLI.

 A) CTAs that are impacted
Albania*   Israel Panama*
Australia Japan Portugal*
Austria Jordan* Qatar*
Bosnia and Herzegovina* Kazakhstan* Russia*
Canada* Korea* Saudi Arabia*
Czech Republic* Latvia*  Serbia
Egypt* Lithuania Signapore
Finland Luxembourg* Slovak Republic
France Malta Slovenia
Georgia New Zealand Sweden
Iceland Norway* United Arab Emirates*
India* Oman* United Kingdom
Indonesia*  Pakistan*  

 * These CTAs may be impacted later than 1 January 2020

B) CTAs that are not yet impacted
Argentina Hong Kong (China) Morocco
Armenia Hungary Nigeria
Barbados Italy  North Macedonia
China (People’s Republic) Kenya Romania
Croatia Kuwait South Africa
Estonia Malaysia Tunisia
Greece Mexico Turkey
C) No CTAs
Belgium Germany Spain
Bulgaria Ireland* Switzerland*
Curaçao Liechtenstein Ukraine
Denmark  Poland Uruguay

* These bilateral tax treaties are already amended and contain the OECD minimum standards