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Friday, 10 December 2021

International Tax Update: MLI to cover the Belgium – Netherlands tax treaty as of 1 January 2022

Somewhat unexpected and until today largely undetected, Belgium and the Netherlands have deposited notifications to the OECD Secretariat, with the intention of bringing their current double tax treaty under the umbrella of the MLI. This should enter into force as of 1 Januari 2022 already. Some specific aspects stand out.

The Multilateral Instrument (or “MLI”) is multilateral treaty that facilitates a quick modification of a multitude of double tax treaties. Without countries having to renegotiate each bilateral treaty separately. The MLI only applies to a double tax treaty if both countries have mentioned the treaty as a potentially covered tax agreement in their notifications to the OECD Secretariat. Belgium already notified the Belgian-Dutch treaty in 2019, but the Netherlands initially did not. However, on 25 November 2021 the latter deposited an additional notification, including its double tax treaty with Belgium in the list of potentially covered tax treaties.

For withholding tax purposes the MLI is to enter into effect as from January 1st 2022. For all other taxes, the MLI will be applicable as from taxable periods starting January 1st 2022, because both Belgium and the Netherlands opted for a shorter period (than the normal period of 6 months) for the MLI’s entry into effect with regard to this treaty.

Some initial, noteworthy observations:

  • First of all the MLI introduces a mandatory binding arbitration (next to the mutual agreement procedure, which was already foreseen for in art. 28 of the tax treaty). If the member states do not find an agreement following the mutual agreement procedure, the taxpayer can have the case submitted to arbitration, which will render a binding decision. However, the MLI provision states that there must be a mutual agreement determining the mode of application before arbitration is possible. Currently, there is not yet such agreement in place between Belgium and the Netherlands.

  • Secondly, a principal purpose test will be introduced in the double tax treaty. From January 1st 2022, a benefit under the double tax treaty will no longer be granted if obtaining the benefit was one of the principal purposes of the transaction.

  • Furthermore, in art. 10 (2) (a) of the double tax treaty, an additional condition is introduced for the reduced withholding tax rate of 5% on dividends. The reduced rate will only apply if the shareholder holds its participation for a period of minimum 365 days. For the computation of that period, changes of ownership due to reorganisations are not taken into account.

  • Finally, regarding personal permanent establishments (“PE”), the MLI provision on contract splitting will not apply. The same is true for the provision on commissionaire arrangements. The current provision, where only a person who is authorized to conclude agreements on behalf of an enterprise can be considered a PE of that enterprise, remains unchanged. The only modification for PE’s is the anti-fragmentation rule, which aggregates the activities of closely related enterprises in order to determine the existence of a PE. Such aggregation clause is not included in all tax treaties, as it is e.g. not included in the newly signed tax treaty between Belgium and France.

Of course, there are more specific changes and points of attention to be noted. However, the most important observation is that these rules would already enter into effect only 37 days after two stealthy notifications to the OECD Secretariat. In other words, MNE’s operating in a cross-border Belgian-Dutch context need to be aware, as they will be faced with this new reality as of 1 January 2022.


Jacob Huyzentruyt - Associate (

Rik Smet - Associate (

Tiberghien’s international tax team will continue to monitor these and other tax developments relevant for Belgium / Luxembourg based multinational enterprises. Our editorial board consists of: 

Koen Morbée (International and EU corporate tax,;

Michiel Boeren (International and EU corporate tax,;

Katrien Bollen (HR tax and global mobility,;

Ben Plessers (Transfer Pricing and Valuations,;

Gert Vranckx (VAT, customs, excises and other indirect taxes,

Ahmed El Jilali (International and EU corporate tax,;

Rik Smet (International and EU corporate tax,


In case you have further questions on this publication or want to discuss a tax query, please do not hesitate to contact the author(s) or one of the members of the editorial board. 

This newsflash is for information purposes only and cannot be relied upon as legal advice.

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