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Update Multilateral Instrument (MLI)9 december 2019mr. dr. R.A. (Alexander) Bosman

Agenda1. Recap: background and framework, recent

developments2. Implementation in the Netherlands3. Selected topics

2

BACKGROUND AND FRAMEWORK, RECENT DEVELOPMENTS

1.

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What is the MLI?

• Multilateral treaty, one treaty between large number of parties• Implementation of BEPS Actions 2, 6, 7 and 14• MLI developed by Ad hoc group of 99+ members• MLI deals with procedural issues; substance is in BEPS Action Reports

• with subgroup of 27 members for Action 14 Arbitration option: both substance and procedure

• MLI aims to relatively rapidly include BEPS measures in existing bilateral tax treaties in a consistent manner

• Nothing new in content / substantive MLI provisions• However, novelty in implementation mechanism

4

Status overview

• Countries can bring more tax treaties within the scope of the MLI than currently notified to the OECD

• BEPS minimum standards may be incorporated in current tax treaty negotiations (parallel to MLI)

• For choices/reservations and matching database, check oe.cd/mli

92Participating jurisdictions

(and counting)

Currently over 1,600 tax treaties to be modified

Expected: around 500 more tax treaties to be modified

37Jurisdictions

ratified(1-2-2020)

5

Effect on existing tax treaties

• The MLI will supplement existing tax treaties

• MLI does not amend treaties (like a protocol) but the treaty and the MLI must be read and applied side-by-side• Hence for implementation and application: two interacting layers of treaty law

Matching needed• The MLI will only apply:

ü to tax treaties concluded between two MLI partiesü to tax treaties explicitly notified by both contracting jurisdictions (i.e.

Covered Tax Agreements – CTAs); and

ü to the extent there are matching MLI choices between those jurisdictions (for most MLI provisions) 6

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Flexibility• Opt-out: reservation – full or partial • Opt-in: choice of alternative provisions

• E.g. elimination of double taxation (art. 5 MLI), specific activity exemptions PE (art. 13 MLI), arbitration (part VI)

• Main rule with optional additions• E.g. PPT supplemented with simplified LOB (art. 7(6) MLI)

• Optional MLI provisions: generally only apply if the two countries concerned indicate the same choice• Exceptions: elimination of double taxation (art. 5 MLI) and asymmetric

application PPT in combination with simplified LOB (art. 7(7)(b) MLI)

7

Content of the MLI• The MLI comprises seven parts:

– Part I. Scope and Interpretation of Terms (Articles 1-2) – Part II. Hybrid Mismatches (Articles 3-5) – Part III. Treaty Abuse (Articles 6-11) – Part IV. Avoidance of PE Status (Articles 12-15) – Part V. Improving Dispute Resolution (Articles 16-17) – Part VI. Arbitration (Articles 18-26) – Part VII. Final Provisions (Articles 27-39)

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Elements of substantive MLI provisions• Description of BEPS measure implemented by the provision

• Compatibility clause: defines interaction with existing CTA provisions

• Reservation clause: defines permitted reservations under the provision

• Notification clause re optional provisions

• Notification clause re existing CTA provisions 9

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Reservations (opt-out)BEPS minimum standards• Opting out only in limited

circumstances• If various options to meet

minimum standards, MLI has no preference

• In case of different approaches, parties to CTA must negotiate satisfactory solution

Non-minimum standards• General or partial opt-outs• Opt-outs apply between reserving state

and all other parties to the MLI• In some cases, reservation on subset of

CTAs allowed• No, unless > authorized reservations are

explicitly listed• Reservations in principle apply

symmetrically

10

ReservationsMeasure Reservations (November 2019)

Transparent entities (Art. 3)

Full opt-out: 63/92

Dual resident entities (Art. 4)

Full opt-out: 56/92

Elimination double taxation (Art. 5)

Option A: 8; option B: 0; option C: 14No choice: 31No choice and reservation: 39

Prevention of treaty abuse (Art. 7)

Detailed LOB: 0PPT as interim measure: 10Discretionary relief: 32Supplement PPT with simplified LOB: 14Asymmetrical simplified LOB: 2

Dividend transfer transactions (Art. 8)

Full opt-out: 51/92

Capital gains imm. prop. companies (Art. 9)

Full opt-out: 47/92Replace or add revised art. 13(4): 42/92 11

ReservationsMeasure Reservations (November 2019)

Low-taxed PEs in third jurisdictions

(Art.10)

Full opt-out: 63/92

‘Saving clause’

(Art. 11)

Full opt-out: 67/92

Commissionaire arrangements

(Art. 12)

Full opt-out: 48/92

Specific activity exemptions (Art. 13)

Full opt-out: 36/92Option A: 46; option B: 7Opt-out of anti-fragmentation rule: 4

Splitting-up of contracts

(Art. 14)

Full opt-out: 59/92

Improving dispute resolution

(Part V)

Request only in R state: 30/92

Binding arbitration

(Part VI)

Opt-in: 30/92

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Notifications existing CTA provisionsCompatibility

clauseEffect

1. In place of 2. Applies to / modifies

3. In the absence of

4. In place of or in the absence of

Notification match MLI provision replaces notified existing CTA provision

MLI provision changes application of notified existing CTA provision

MLI provision effectively added to CTA

MLI provision replaces notified existing CTA provision or is effectively added to CTA

Notification mismatch

MLI provision has no effect

MLI provision has no effect

MLI provision has no effect

MLI provision applies, supersedes existing CTA provision to the extent that it is incompatible with the MLI provision

þ

ý

þ

þ13

When will the MLI have effect?

Signing

• Open for signature: as of 31 December 2016, signing ceremony on 7 June 2017

Entry intoforce

• 3 months after ratification by at least 5 Parties (including notification to OECD)

• For each subsequent Party, 3 months after ratification (and notification)

Entry intoeffect

• At the earliest as of 1 October 2018 (for 5 jurisdictions)• Large-scale entry into effect as of 2019 / 2020

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When will the MLI have effect?Withholding taxes

• Taxable events occurring on or after the first day of the calendar year that begins on or after the latest of the two dates on which the MLI enters into force for each of the two Contracting States

• Country A: entry into force 1 March 2018

• Country B: entry into force 1 March 2019• MLI will take effect with respect to

withholding taxes relating to an event occurring as of 1 January 2020

Other taxes (including CIT)

• Taxable periods beginning on or after expiration of a period of 6 calendar months (or a shorter period if Contracting States agree on this) from the latest of the two dates on which the MLI enters into force for each of the two Contracting States

• Country A: entry into force 1 March 2018 • Country B: entry into force 1 September

2018• MLI will take effect with respect to taxable

periods beginning on or after 1 March 2019 (if taxable year = calendar year: as of 1 January 2020) 15

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When will the MLI have effect?29 March 2019:

Ratification/ notification by NL

1 July 2019:Entry into force

1 Jan 2020: Entry into effect

for WHT

Tax years on or after 1 Jan 2020: Entry into effect for other taxes

(e.g. CIT) 16

Jurisdiction SignatureDeposit rat. instr.

Entry into Force

Australia 7-6-2017 26-9-2018 1-1-2019Austria 7-6-2017 22-9-2017 1-7-2018Belgium 7-6-2017 27-6-2019 1-10-2019Canada 7-6-2017 29-8-2019 1-12-2019Curaçao 7-6-2017 29-3-2019 1-7-2019Denmark 7-6-2017 30-9-2019 1-1-2020Finland 7-6-2017 25-2-2019 1-6-2019France 7-6-2017 26-9-2018 1-1-2019Georgia 7-6-2017 29-3-2019 1-7-2019Guernsey 7-6-2017 12-2-2019 1-6-2019Iceland 7-6-2017 26-9-2019 1-1-2020India 7-6-2017 25-6-2019 1-10-2019Ireland 7-6-2017 29-1-2019 1-5-2019Isle of Man 7-6-2017 25-10-2017 1-7-2018Israel 7-6-2017 13-9-2018 1-1-2019Japan 7-6-2017 26-9-2018 1-1-2019Jersey 7-6-2017 15-12-2017 1-7-2018Latvia 7-6-2017 29-10-2019 1-2-2020Lithuania 7-6-2017 11-9-2018 1-1-2019Luxembourg 7-6-2017 9-4-2019 1-8-2019

Jurisdiction SignatureDeposit rat. instr.

Entry into Force

Malta 7-6-2017 18-12-2018 1-4-2019Mauritius 5-7-2017 18-10-2019 1-2-2020Monaco 7-6-2017 10-1-2019 1-5-2019Netherlands 7-6-2017 29-3-2019 1-7-2019New Zealand 7-6-2017 27-6-2018 1-10-2018Norway 7-6-2017 17-7-2019 1-11-2019Poland 7-6-2017 23-1-2018 1-7-2018Russia 7-6-2017 18-6-2019 1-10-2019Serbia 7-6-2017 5-6-2018 1-10-2018Singapore 7-6-2017 21-12-2018 1-4-2019Slovak Republic

7-6-2017 20-9-2018 1-1-2019

Slovenia 7-6-2017 22-3-2018 1-7-2018Sweden 7-6-2017 22-6-2018 1-10-2018Switzerland 7-6-2017 29-8-2019 1-12-2019Ukraine 23-7-2018 8-8-2019 1-12-2019United Arab Emirates

27-6-2018 29-5-2019 1-9-2019

United Kingdom 7-6-2017 29-6-2018 1-10-2018

MLI parties and entry into force dates

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Retroactive effect?

Art. 9: Value imm. prop. > 50% value shares during any of preceding 365 days?

RCo

State RState S

Other assets

Art. 8: 365-day holding period in

art. 10(2) treaty S-R

TCo RCo

SCo

State T

State S

0% WHTDTT

Repo

15% WHTDTT

State R

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Step plan 1. Is the relevant tax treaty a CTA?2. As of when is the MLI applicable to the CTA (timing)? 3. Which MLI provisions are applicable?4. Which existing CTA provisions are modified, and how?5. Treaty application = CTA + MLI

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IMPLEMENTATION IN THENETHERLANDS

2.

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Hybrids Anti-abuse PEs Dispute resolution

Eliminationdouble taxation

Dual resident entities

Transparententities

Splitting-up of contracts

Specific activityexemptions

Commissionairearrangements

Arbitration

Correspondingadjustments

MAP

'Saving clause’

Low-taxed PEs

Capital gains on RE companies

Dividend transfer transactions

Prevention of treaty abuse

Preamble

Minimum standard

Optional21

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Hybrids Anti-abuse PEs Dispute resolution

Eliminationdouble taxation

Dual resident entities

Transparententities

Splitting-up of contracts

Specific activityexemptions

Commissionairearrangements

Arbitration

Correspondingadjustments

MAP

'Saving clause’

Low-taxed PEs

Capital gains on RE companies

Dividend transfer transactions

Prevention of treaty abuse

Preamble

Minimum standard

Option selected

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Position of the Netherlands

• As many tax treaties as possible within scope of MLI, excl. certain tax treaties on which negations are currently pending• Belgium, Brazil, Bulgaria, Denmark, Ireland, Poland, Spain, Switzerland and Ukraine

• In principle all substantial MLI provisions, subject to certain technical reservations• Temporary reservation on ‘anti-commissionaire provision’

• Curaçao: only treaties with Malta and Norway• Mainly minimum standards and opt-in for arbitration

58 treaties impacted

23 treaties not affected

81

94 total treaties, of which 81 covered and:

23

Nr Nederlandse CTA’s Bronbel. Overige bel.

1 Albania2 Argentina

3 Armenia

4 Australia 1-1-2020 1-1-20205 Austria 1-1-2020 1-1-2020

6 Barbados

7 Bosnia Herzegovina8 Canada (1) 1-1-2020 1-6-2020

9 China

10 Croatia11 Czech Republic

12 Egypt

13 Estonia14 Finland 1-1-2020 1-1-2020

15 France 1-1-2020 1-1-2020

16 Georgia 1-1-2020 1-1-202017 Germany

18 Greece

19 Hong Kong (China)20 Hungary (1)

21 Iceland 1-1-2020 1-7-2020

22 India 1-1-2020 1-4-202023 Indonesia (1)

24 Israel 1-1-2020 1-1-202025 Italy

26 Japan 1-1-2020 1-1-2020

27 Kazakhstan28 Kenia

29 Korea

Nr Nederlandse CTA’s Bronbel. Overige bel.

30 Kuwait

31 Latvia 1-1-2021 1-8-2020

32 Lithuania 1-1-2020 1-1-2020

33 Luxembourg 1-1-2020 1-2-202034 Malaysia

35 Malta (1) 1-1-2020 1-1-2020

36 Morocco37 Mexico

38 New Zealand 1-1-2020 1-1-2020

39 Nigeria40 Norway 1-1-2020 1-5-2020

41 Oman

42 Pakistan

43 Panama44 Portugal

45 Qatar

46 Romania47 Russia nnb nnb

48 Saudi Arabia

49 Serbia 1-1-2020 1-1-202050 Singapore (1) 1-1-2020 1-1-2020

51 Slovak Republic 1-1-2020 1-1-2020

52 Slovenia 1-1-2020 1-1-202053 South Africa

54 Sweden nnb nnb

55 Tunisia

56 Turkey57 United Arab Em. 1-1-2020 1-3-2020

58 United Kingdom 1-1-2020 1-1-2020

Overview of Dutch CTAs

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SELECTED TOPICS3.

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Art. 3 MLI – Transparent entities 1. Income derived by or through a transparent

entity is only considered income of a resident of a Contracting State (and thus eligible for treaty benefits) to the extent it is treated by that Contracting State as income of a resident of that Contracting State [mainly addressed to source state]

2. Contracting States are only required to relieve double taxation pursuant to a tax treaty to the extent that the other Contracting State taxes income in accordance with the tax treaty either as (i) source state or (ii) PE state [addressed to residence state]

NL position• Applies provision

– Both art. 3(1) and (2) MLI• No general reservation (no

opt-out)• Reservation for particular

subsets of CTAs which already address hybrid mismatches (art. 3(5)(d) MLI)

26

Art. 3 MLI – Impacted NL tax treaties• Argentina• Armenia• Australia• Israel• Kenya• Luxembourg*• Malaysia*• Mexico

* Only Art. 3(1)

• New-Zealand• Nigeria• Norway• Romania• Russia• Slovak Republic• South Africa• Turkey

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Example 1

No benefits treaty R-S for

Participants 1 and 2

Participant 1 Participant 2

SCo

Interest

Example 2

Benefits treaty R-S only for

Participant 1

Participant 1 Participant 2

SCo

Interest

State RState S

State RState S

State T

Hybridentity

Hybridentity

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Example 3

Neither state obliged to provide relief under tax treaty

Participant 1

Participant 2

Example 4

• State R to provide relief for PE profit

• State S not obliged to provide relief

Participant 1

Participant 2

State RState S

State RState S

PE

HybridEntity

HybridEntity

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Example 5

• State R to provide relief for PE profit• State S to provide credit to SCo for State R tax on

interest taxable under Art. 11(2)• State R to provide relief to Participants for State S

tax on interest (ex. or cr.)

Participant 1

Participant 2Borrower

State RState S

Interest (30% of income)

PE

Example 6

• State R may tax interest under Art. 11(2)• State S to provide credit to SCo for State R tax• State R not obliged to provide relief for State S

tax on interest (does not arise in State S)

Participant 1

Participant 2Borrower

State RState S

Interest

Other profits (70% of income)

Sco Sco

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Art. 4 MLI – Dual resident entities• Country of residence of a dual

resident entity to be determined in a MAP

• PoEM no longer decisive! • No CTA benefits until treaty residence

is settled in a MAP• No grandfathering

NL position• Applies provision• No general reservation (no opt-out)• No reservation for particular subsets

of CTAs

31

Art. 4 MLI – Impacted NL tax treaties• Argentina• Armenia• Australia• Canada• China• Egypt• India• Indonesia• Israel• Japan• Kazakhstan• Kenya

• New Zealand• Nigeria• Norway• Oman• Romania• Russia• Serbia• Slovak Republic• Slovenia• South Africa• United Kingdom

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Art. 4 MLI – Examples• Replacement of tie-breaker on the basis of PoEM

– Decree State Secretary of Finance 19 March 2019, no. 2019-30576

• Replacement of treaty MAP (e.g. UK-NL tax treaty)– Residence determined pursuant to bilateral

MAP? – Grandfathering under bilateral MAP?

• Foreign entities originally incorporated under Dutch law

NL BVNetherlands

United Kingdom

Argentina

ForeignCo

NL BVNetherlands

Netherlands

Luxembourg

Conv

ersio

n

Article 4 MLIjurisdiction

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Art. 7 MLI – Prevention of treaty abuse• PPT is the default option (since it satisfies

the BEPS minimum standard on its own) > all 92 jurisdictions

• Parties may supplement the PPT by opting for a simplified LOB > 14 jurisdictions

• Parties may opt out of the PPT and choose a detailed LOB > 0 jurisdictions– Should be negotiated bilaterally, not included in MLI

• Apply the PPT as an interim measure > 10 jurisdictions

• Opt-in for discretionary relief under PPT > 32 jurisdictions

NL position• Applies provision• Minimum standard• No reservation > application of PPT• Opt-in discretionary relief under PPT (art.

7(4) MLI)

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Art. 7 MLI – Prevention of treaty abuse

PPT– Specific treaty benefits may be denied if obtaining that benefit was one of the

principal purposes of an arrangement or transaction– Unless granting that benefit would be in accordance with object and purpose

of the relevant treaty provisions

– All source state limitations, relief from double taxation and non-discrimination– Other specific treaty anti-abuse rules unaffected (e.g. LOB or anti-abuse rule

for third state PEs), cumulative tests– Optional: discretionary relief

35

Art. 7 MLI – Position of the Netherlands

• PPT will be applied in line with domestic anti-abuse provisions– DWT and art. 17(3)(b) CITA– Also in line with EU PSD GAAR

• Relevance of CJEU case law– Broader / other PPT scope intra EU?

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Art. 7 MLI – PPT – Example• EU HoldCo was set up in the Netherlands

for reasons including the availability of experienced local directors, skilled multilingual workforce, EU membership and the Netherlands’ extensive tax treaty network. EU HoldCo has 4 employees on its payroll.

• Could source countries deny tax treaty benefits in respect of interest payments to EU HoldCo under the PPT?

EU subs Non-EU subs

Guarantee

Loans

ParentCo

HoldCo

Loans

Banks

Reduced WHT under DTTs

Reduced WHT under DTTs

No WHT Loans

EU HoldCo

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Art. 7 MLI – Prevention of treaty abusePPT – OECD guidance

• Core: subjective test > mainly source state issue– Facts and circumstances of each case, objective analysis of aims and objects of all persons

involved in arrangement/transaction– Objectified subjective test

• Role of valid business reasons (compare EU GAAR)?– If inextricably linked to core commercial activity and form not driven by obtaining treaty

benefit > unlikely that PPT applies – See examples

• Not granting treaty benefit: legal consequences?– Treaty shopping vs. article shopping– Interaction between source state and residence state is unclear

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Art. 7 MLI – Prevention of treaty abuse• Directly or indirectly: broad scope• Arrangement or transaction: any agreement, understanding,

scheme, transaction or series of transactions– Creation, assignment, acquisition or transfer of relevant income– Establishment, acquisition or maintenance of entity, including residence – E.g. organizing board meetings in other country to claim residence there

• Object and purpose• Burden of proof

– Reasonable conclusion, conclusive proof not necessary, but also not to be assumed lightly

– Object and purpose to be established by taxpayer • How to deal with conflicting views / double taxation? 39

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Example B

• PPT applies: contrary to object and purpose R-S tax treaty

TCo RCo

SCo

Example E

• PPT does not apply: not contrary to purpose of threshold Art. 10(2)(a)

• [365-day holding period Art. 8 MLI]

State T

State S

5% WHTDTT

Usufruct

25% WHTNo DTT

RCo

SCo

State R

State S 24% > 25%

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Example G

• PPT does not apply: real business, substantive economic functions, own personnel

TCo

Subsidiaries(various

countries)RCo

Example K

• PPT does not apply: consider context of investment, reasons for choosing State R and investment functions in State R

State T

Group servicesDTT benefits

Regional company

RCo

State T

State R• Skilled labour force• Legal system• Politically stable• Tax treaty network

Fund

Regional inv. platformState R• Directors• Skilled workforce• Regional grouping• Tax treaty network

Subsidiaries(various

countries)SCo

DTT R

-S: 5

% W

HT

DTT T

-S: 1

0% W

HT

State S

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Example L

• PPT does not apply: consider context of investment (securitization framework, relevant legislation, workforce)

Example M

• PPT does not apply: property investments made for commercial reasons consistent with investment mandate Fund

RCo

State C

State R• Politically stable• Regulatory system• Qualified personnel• Tax treaty network

Fund

PropertyCo 2

PropertyCo 1

RCo

Trust Bank

Various borrowers

Loanportfolio

Listedsecurities

State T

State RState S 10% WHT

DTT

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Art. 7 MLI – Prevention of treaty abuseRelevant factors based on OECD guidance (no safe havens):

• Exercising or expanding real or active business activities – Including intra-group services, such as management,

accounting, legal and HR services, financing and treasury– Providing working capital in the form of equity and loans

• Performing substantial economic functions, using real assets and assuming real risks

• Carrying out business activities with own employees and sufficient financial resources

• Economic reasons, such as low production costs or setting up a company because of business efficiency reasons

• For funds: carrying out an investment strategy not driven by tax considerations with regard to investors

• The choice for a business location based on the presence of– Highly qualified or multilingual workforce– Reliable legal or regulatory system– Business-friendly environment– Political stability – Membership of regional grouping such as the EU and

common currency– Developed banking sector – Presence of developed trade and financial markets – Directors familiar with local business practices and

regulations

• Experienced local management team that assesses, approves and monitors investments (in a fund structure), performs treasury functions, maintains books and records and ensures regulatory compliance

• Majority of local resident directors with relevant experience

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PPT discretionary relief• Allows states to grant treaty benefits

to a person that does not satisfy the PPT, if those treaty benefits would have been granted to that person in the absence of the arrangement or transaction at hand

• Upon request of taxpayer• Treaty jurisdiction needs to consult

competent authority of their treaty partner before rejecting request and applying the PPT

BV

Sarl

Ltd

Luxembourg

Singapore

0% WHT → 10%?

Netherlands

Roy.

Roy.

44

PE – Positions of NL and neighbours Ne

ther

lands

Belgi

um

Luxe

mbo

urg

Switz

erlan

d

Fran

ce

Germ

any

Irelan

d

UK

Optional anti-fragmentation rule

Restricting specific activity exemptions to prep. or aux. activities

Commissionnairearrangements and similar strategies

Splitting-up of contracts

þ

þ

þ

þ

þ

þ

þ

þ

þ

þ

þ

þ

þ

þþ

þ

ý

ý

ý

ý

ý

ý

ý

ý

ý

ý

ý

ý

Art. 12

Art. 13(4)

ý ý ýý

Art. 14

Art. 13

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Art. 12 MLI – Commissionaire arrangements• Lowers the threshold for a dependent agent PE • PE if a person acts on behalf of a foreign

enterprise and habitually plays the principal role in the conclusion of contracts that are routinely concluded without material modification by the foreign enterprise, if the contracts are:• in the name of the foreign enterprise;• for the transfer of property owned by the foreign

enterprise; or • for the provision of services by the foreign enterprise

• Exception for independent agent, unless closely related enterprise

NL position• Does not apply provision• General reservation (opt-out)

– Temporary opt-out – Opt-in generally effective at the earliest for

tax book years beginning on or after 1 January 2022

• Domestic PE definition in line with MLI as of 1 January 2020!

46

Art. 12 MLI – Commissionaire arrangements• Adjustment of the Agency PE definition to prevent three types of abuse:

A. Commissionaire arrangementsCommissionaire concludes contract with customer that binds the commissionaire and NOT the principal

B. Sales contracts are substantially negotiated in State S, but are concluded (finalized/authorized) in the residence State of principalNo contract concluded by agent

C. The intermediary acts in a way meeting the conditions of the exception for “independent agent”

• In all of these three instances: the sales activities exercised in State S result in conclusion of sales contracts that are to be performed by principal; therefore sufficient nexus for State S taxation of principal

47

Art. 12 MLI – Commissionaire arrangements

• New requirements:1. Person acting in State S on behalf of or for enterprise2. Habitually concluding contracts (binding on principal or only agent)

[commissionaire] OR habitually playing the principal role leading to routine conclusion of contracts by foreign enterprise, and

3. Contracts are (a) concluded (by agent or foreign enterprise) in the name of the foreign enterprise OR (b & c) for sales, lease or services to be performed by the foreign enterprise

• Unless: – Intermediary qualifies as independent agent (amended) – Exception for preparatory & auxiliary activities (amended)

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Principal

Intermediary CustomersMarketing / sale

Goods / services

On behalf of ...?Habitually …?Plays the principal role...?Leading to conclusion of contracts…?Routinely concluded without material modification…? 49

Art. 13 MLI – Specific activity exemptions• Parties may apply Option A, Option B

or neither: A. Restricting existing specific activity

exemptions in CTAs explicitly to preparatory or auxiliary activities

B. Preserving existing specific activity exemptions in CTAs, while ensuring that those exceptions apply irrespective of whether the activity is of a preparatory or auxiliary character

• Optional anti-fragmentation rule

NL position• Applies provision• Choice for Option A• Applies anti-fragmentation rule (no

opt-out)

50

Art. 13 MLI – Impacted NL tax treaties• Argentina• Armenia?• Australia• Austria*• Croatia• Egypt• France**• Germany*• India• Indonesia• Israel• Italy• Japan• Kazakhstan?• Kenya• Kuwait• Lithuania**

* Only Option A ** Only anti-fragmentation rule

• Malaysia• Mexico• New Zealand• Nigeria• Norway• Portugal**• Romania• Russia• Saudi Arabia?• Serbia• Slovak Republic• Slovenia• South Africa• Tunisia• Turkey• United Kingdom**

? = Possible notification mismatch

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Anti-fragmentation rule

RCo

Sales CoAgency PE

52

Art. 14 MLI – Splitting-up of contractsThe following activities are aggregated for the purpose of existing CTA provisions similar to art. 5(3) OECD Model:

– activities at a place that constitutes a building site or construction or installation project or other activities specified in the relevant CTA provision or supervisory or consultancy activities in connection with such a place, that are carried on during on or more periods of time that, in the aggregate, exceed 30 days; and

– connected activities at the same building site or construction or installation project by one or more ‘closely related’ enterprises during different periods of time

NL position• Applies provision• No general reservation (no opt-out)• Specific reservation of art. 14(3)(b) MLI

– Preservation of offshore provisions in Dutch CTAs

53

Art. 14 MLI – Impacted NL tax treaties• Argentina*• Armenia*• Australia• Egypt*• India• Indonesia*• Israel• Kazakhstan*• Kenya• Kuwait*• Lithuania*

* Carve-out for existing offshore provisions

• New Zealand• Nigeria• Norway*• Romania*• Russia*• Saudi Arabia*• Serbia• Slovak Republic• Tunisia

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Anti-splitting rule

55

QUESTIONS?

56