27 June 2017 / article

MLI Matching Overview

On 7 June 2017, the multilateral instrument (MLI) was signed covering 68 jurisdictions, including the Netherlands, Belgium, Luxembourg and Switzerland. The MLI should accelerate the implementation of key Base Erosion and Profit Shifting (BEPS) measures into a large number of bilateral tax treaties. The overview below shows whether the bilateral tax treaties of the four jurisdictions with their most important treaty partners are so-called ‘Covered Tax Agreements’ (“CTA”) to which the MLI applies.

Moreover, it sets out the impact of the so-called principal purpose test (“PPT”) of article 7 of the MLI (“MLI PPT”) on those CTAs. The PPT is an anti-abuse provision that should deny application of treaty benefits in certain situations.

A number of outcomes regarding the PPT are possible between treaty partners:

  • PPT applies
    Existing provisions in the CTA that already contained a principal purpose test are replaced with the MLI PPT or, in the absence of existing provisions, the MLI PPT is added to that CTA.

  • PPT + DR applies
    Same as ‘PPT applies’, but both jurisdictions have opted for the discretionary relief clause of article 7(4) of the MLI. The latter clause provides discretion to the authorities of the treaty parties to allow application of tax treaty benefits in certain situations where the PPT is applicable.

  • PPT applies, but intended as interim measure by treaty partner
    Certain countries have expressed an intention to negotiate limitation-on-benefits (“LOB”) provisions with their treaty partners but will apply the MLI PPT in the meantime. None of the Netherlands, Belgium, Luxembourg and Switzerland has expressed such intention.
     
  • PPT applies to the extent existing CTA provisions are incompatible
    If there is an existing provision in the CTA that contains a principal purpose test but that has not been properly notified to the OECD by both treaty partners, the MLI PPT is added to the treaty and supersedes the existing CTA provisions to the extent the latter are incompatible with the MLI PPT.

In certain instances there is no bilateral tax treaty in place between the Netherlands, Belgium, Luxembourg or Switzerland and the other jurisdiction. In such cases, the overview shows ‘No DTT’.

Download MLI Overview (pdf)

The multilateral instrument (MLI) table

  Covered Tax Agreement Principal Purpose Test
  Art. 2 Art. 7(1) - 7(5)
  NL BE LUX CH NL BE LUX CH
Argentina  Yes  Yes  No DTT Yes  PPT applies PPT applies No DTT PPT applies
Australia  Yes  Yes  No DTT No PPT + DR applies PPT + DR applies No DTT x
Austria  Yes  Yes  Yes  Yes  PPT applies PPT applies PPT applies PPT applies
Belgium  No - Yes  No x - PPT + DR applies x
Canada  Yes  Yes  Yes  No PPT applies, but intended as interim measure by treaty partner PPT applies, but intended as interim measure by treaty partner PPT applies, but intended as interim measure by treaty partner x
Chile  No DTT Yes  No DTT  Yes  No DTT PPT applies, but intended as interim measure by treaty partner No DTT PPT applies, but intended as interim measure by treaty partner
China (People’s Republic of)  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Cyprus  No DTT  Yes  No DTT  No No DTT PPT + DR applies No DTT x
Czech Republic  Yes  Yes  Yes  Yes  PPT + DR applies PPT + DR applies PPT + DR applies PPT applies
Denmark  No Yes  Yes  No x PPT applies PPT applies x
France  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Germany  Yes  No Yes  No PPT applies x PPT applies x
Greece  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Hong Kong (China)  Yes  Yes  Yes  No PPT applies to the extent existing CTA provisions are incompatible PPT applies PPT applies x
India  Yes  Yes  Yes  Yes  PPT applies PPT applies PPT applies PPT applies to the extent existing CTA provisions are incompatible
Indonesia  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Ireland  No Yes  Yes  No x PPT + DR applies PPT + DR applies x
Israel  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Italy  Yes  Yes  Yes  Yes  PPT applies PPT applies PPT applies PPT applies
Japan  Yes  No Yes  No PPT applies x PPT applies x
Korea  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Luxembourg  Yes  Yes  - Yes  PPT + DR applies PPT + DR applies - PPT applies
Malta  Yes  Yes  Yes  No PPT + DR applies PPT + DR applies PPT + DR applies -
Mexico  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Netherlands  - No Yes  No - x PPT + DR applies x
Poland  No Yes  Yes  Yes  x PPT applies, but intended as interim measure by treaty partner PPT applies, but intended as interim measure by treaty partner PPT applies, but intended as interim measure by treaty partner
Portugal  Yes  Yes  Yes  Yes  PPT applies PPT applies PPT applies PPT applies
Romania  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Russia  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Singapore  Yes  Yes  Yes  No PPT + DR applies PPT + DR applies PPT + DR applies x
Spain No Yes  Yes  No x PPT applies PPT applies x
Sweden  Yes  Yes  Yes  No PPT applies PPT applies PPT applies x
Switzerland No No Yes  - x x PPT applies -
Turkey Yes  Yes  Yes  Yes  PPT applies PPT applies PPT applies PPT applies
United Kingdom  Yes  Yes  Yes  No PPT + DR applies PPT + DR applies PPT + DR applies x
Uruguay No DTT  Yes  Yes  No No DTT PPT + DR applies PPT + DR applies x

This high level overview is provisional and cannot be seen as tax and/or legal advice. Please contact one of our MLI specialists before taking any action based on this publication.

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