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Netherlands: BEPS multilateral instrument (MLI) update

Netherlands: BEPS multilateral instrument (MLI) update

The process in the Netherlands for implementing the Multilateral Instrument (MLI) has advanced.


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The Dutch Lower House of Parliament on 12 February 2019 passed legislation for ratifying the multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS)—also referred to as the MLI—and to improve dispute resolution mechanisms.

The Lower House also agreed to change the MLI position of the Netherlands with respect to preventing the artificial avoidance of permanent establishment status. 


The MLI offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the BEPS project into bilateral tax treaties by:

  • Modifying the application of thousands of bilateral tax treaties concluded to eliminate double taxation
  • Implementing agreed minimum standards to combat treaty abuse
  • Improving dispute resolution mechanisms
  • Providing flexibility to accommodate specific tax treaty policies

The MLI currently covers 87 jurisdictions and entered into force on 1 July 2018 for those countries that had promptly ratified it. 

MLI position—prevention of artificial avoidance of PE status

The Netherlands initially indicated that it fell within the scope of the MLI with respect to almost all options and thus had relatively few reservations. The Dutch government also opted for the measure to prevent the artificial avoidance of permanent establishment status in relation to BEPS, including through the use of commissionaire arrangements (Article 12 MLI).

However, several legislators were concerned that some treaty partners may strategically attempt to maximize tax revenue to the detriment of other countries. In order to prevent such behaviour, there needs to be an effective means of dispute resolution as long as there is no international consensus on the definition of permanent establishment or on the profit allocation to a permanent establishment. Consequently, the Netherlands will make a reservation on Article 12 until an effective dispute resolution between a sufficient number of signatories to the MLI and the Netherlands is in place. If sufficient progress is made in this respect or once the rules on profit allocation are clear, the government could submit a bill by the end of 2020 in order to withdraw the reservation. 

What's next?

The MLI ratification bill will now be presented to the Upper House. The MLI provisions on “covered tax agreements” with a match (listed by jurisdictions that have ratified the MLI before the end of March 2019) can enter into effect for the Netherlands as of 1 January 2020 at the earliest.

Read a February 2019 report prepared by the KPMG member firm in the Netherlands

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