Netherlands deposits MLI ratification instrument with OECD after opting out of PE rule

By Jian-Cheng Ku and Rhys Bane, DLA Piper Nederland N.V.

On March 29 the Netherlands deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”) with the OECD in Paris.

The Dutch House of Representatives ratified the MLI on February 12, 2019 after two members of the Dutch House of Representatives, Helma Lodders of the People’s Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie or VVD) and Evert Jan Slootweg of the Christian Democratic Appeal (Christen-Democratisch Appèl or CDA) had their joint amendment to the ratification instrument passed.

Under the amendment to the MLI ratification instrument, the Netherlands has ‘opted-out’ of Article 12 of the MLI. Article 12 of the MLI provides rules combating the artificial avoidance of permanent establishment status through commissionaire arrangements and similar strategies in Covered Tax Agreements. Lodders and Slootweg intend for this opting-out to be temporary, pending the publication of more guidance on the attribution of profits to such permanent establishments.

The MLI has a number of minimum standards that apply to all signatories of the MLI. The most important minimum standard is the so-called ‘principle purpose test’, which allows for jurisdictions to deny tax treaty benefits if they are of the opinion that the principle purpose of a structure is to obtain tax treaty benefits, where it would not be in line with the object and purpose of the relevant provision(s) to extend these tax treaty benefits to the relevant taxpayer. This may be the case with, for example, holding companies that have (almost) zero substance, where the holding company has been interposed purely to obtain tax treaty benefits.

Finally, the Netherlands has opted-in for most optional clauses of the MLI. It must be noted, however, that these generally (with a few exceptions) only apply if both jurisdictions (which have a bilateral tax treaty) have opted-in for the same MLI provisions. In this regard, it must also be noted that many jurisdictions have made less ‘ambitious’ (as the Dutch State Secretary of Finance puts it) choices than the Netherlands.

Further discussion of the Netherlands MLI selections can be found in Jian-Cheng Ku’s and Jeroen Swart’s earlier article, available at this link.


Jian-Cheng Ku

Jian-Cheng Ku

Attorney at Law / Tax Advisor at DLA Piper Nederland N.V.

Jian-Cheng Ku advises on international tax law and transfer pricing with a particular focus on international tax planning, M&A and private equity transactions, corporate reorganisations, and planning and design of transfer pricing policies.

Jian-Cheng Ku
Rhys Bane

Rhys Bane

Tax Advisor | Junior Associate at DLA Piper Nederland N.V.
Rhys Bane advises clients on Dutch and international (corporate) taxation aspects of international tax planning, corporate restructurings and M&A. He also focuses on tax policy and legislation in the area of Dutch, European and international (corporate) taxation.
Rhys Bane

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