On 20 December 2017, the Dutch government submitted the bill for ratification of the Multilateral Instrument (“MLI”) to parliament. The bill contains a summary of the various BEPS measures to be implemented by the MLI, without giving much guidance for interpretation. The positions taken on the MLI do not deviate from the provisional list of choices and reservations notified by the Netherlands to the OECD in June 2017.
The Netherlands signed the MLI in June 2017. The Dutch government intends to complete the ratification procedure in the first half of 2018, so that the MLI may have effect for tax treaties concluded by the Netherlands as of 1 January 2019 (depending on the ratification by its treaty partners). At this moment, three countries completed their MLI ratification procedure.
The Netherlands intends to bring as many tax treaties as possible within the scope of the MLI, but has excluded some tax treaties on which negations are pending. Currently, the Netherlands listed 82 out of its 94 tax treaties. Based on the (provisional) choices of its treaty partners, the Netherlands currently expects 44 of its tax treaties to be affected by the MLI.
As to the MLI provisions, the Netherlands in principle accepts all substantial provisions, subject to certain technical reservations. These substantial MLI provisions include mandatory anti-abuse rules, such as the so-called principal purpose test (PPT) to avoid treaty shopping, as well as optional rules that, for example, address hybrid mismatches, disallow tax treaty benefits for dual resident companies unless the competent authorities settle the residence by mutual agreement, and lower the permanent establishment threshold (for example in cases of commissionaire structures and similar arrangements). In addition to the anti-abuse rules, the Netherlands chose to apply provisions on mutual agreement procedures and mandatory binding arbitration in order to improve dispute resolution in tax matters. As the Netherlands has made its provisional list of MLI choices subject to the domestic ratification process, the provisional list of choices is still subject to potential change by Dutch parliament.