Multilateral Instrument (MLI) applicable to several Dutch double tax treaties

As of January 1, 2020, the Multilateral Instrument (hereinafter: MLI) is applicable to several Dutch double tax treaties. On December 9, 2019 the Dutch State Secretary of Finance published a new decree to provide Dutch tax payers more insight on his point of view regarding the effects of the MLI.

One of the measures of the MLI is the Mutual Agreement Procedure (hereinafter: MAP) tiebreaker between treaty partners to determine the domicile of dual resident companies. Based on the MAP-tiebreaker a dual resident company can file a request to start a MAP at the competent authority of one of the tax treaty jurisdictions. The request to start a MAP should be filed within the period indicated in the relevant tax treaty (this is usually three years after the first notification that the treaty benefits will be denied due to the dual residency).

In principle the Netherlands aims to provide clarity on the outcome within six months after the request is filed. In case your company is a dual resident entity and the entity has previously received approval on its residency from both tax treaty jurisdictions, this approval may be grandfathered by the new decree. Both, the aim to provide clarity within six months and the grandfathering, are subject to the approval of the foreign tax authorities and can therefore not be granted by the Dutch tax authorities.

Please contact Gerriët Nagelhout or Timothy Wells for the exact conditions of the grandfathering or the MAP-decree in general.