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Netherlands: Guidance on MLI tie breaker rule to determine tax residency

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The dual residency measure in the MLI results in some uncertainty

Roderik Bouwman and Tim Mulder of DLA Piper Netherlands explain the Dutch implementation of the Multilateral Instrument and how this is being used to deal with existing dual residency situations.

As of January 1 2020, the Multilateral Instrument (MLI) applies to several bilateral tax treaties concluded by the Netherlands. At present, 22 tax treaties by the Netherlands are covered under the MLI.

The MLI helps to fight against base erosion and profit shifting (BEPS) by implementing tax treaty related measures developed through the OECD BEPS project in existing bilateral tax treaties in a synchronised and efficient manner.

One of the measures in the MLI provides that where a person other than an individual that is a resident of both tax treaty states – a dual resident person, the competent authorities of the tax treaty states shall endeavor to determine by mutual agreement the tax treaty residency of that person. In the absence of such agreement, such a dual resident person shall not be entitled to treaty benefits.

Till the MLI became applicable, most tax treaties concluded by the Netherlands provided that the place of effective management of a company was decisive in determining a dual resident entity’s tax treaty residency, under the ‘corporate tie breaker rule’. In some tax treaties, the tax treaty residency of a dual resident person required mutual agreement between the competent authorities.

The dual residency measure in the MLI results in more uncertainty about the tax residency of dual resident persons and entitlement of treaty benefits. On December 20 2019, the Netherlands therefore published a decree setting procedures for a mutual agreement procedure (MAP) and how to deal with existing dual residency situations.


Generally the relevant tax treaty provides the procedures for a MAP. In most cases, a request for a MAP should be filed by the taxpayer within three years following the moment it noticed not receiving treaty benefits due to its dual residency status. The request should be filed in the jurisdiction where the taxpayer is resident, meaning a dual resident person can file the request in both jurisdictions. 

In the Netherlands, a MAP should be filed with the International Fiscal Affairs department of the Dutch tax authorities. The Dutch competent authorities aim to finalise the MAP within six months after all relevant information is received although they are dependent on the collaboration from the foreign competent authorities as well. During the MAP, the dual resident person is not entitled to treaty benefits.

Part of the MAP outcome is to decide from which moment the dual resident person is entitled to treaty benefits. In this respect, Dutch competent authorities have a preference from the moment the dual residency arises.

Grandfathering existing situation

The Dutch decree provides that in the following two scenarios it is undesirable requiring a dual resident person to request a new MAP to determine its tax treaty residency.

First, if the tax treaty residency is determined based on the corporate tie breaker provision in the tax treaty whereby the place of effective management is decisive. If in this situation there has been no change in facts and circumstances, and the tax treaty residency of the dual resident person is implicitly approved by the competent authorities of both states, no new MAP under the MLI MAP tiebreaker has to be filed. Implicit approval includes situations where both competent authorities issue tax assessments for the dual resident person and accepting the same tax treaty residency.

Secondly, if the tax treaty residency is determined based on an existing MAP and both competent authorities already have reached to an agreement about the tax treaty residency, no new MAP under the MLI MAP tie breaker has to be filed.

Noted that the Dutch tax authorities can still require a new MAP and deny tax treaty benefits in case of treaty abuse. Furthermore, the decree only provides the position from the Netherlands and therefore foreign competent authorities still may require a new MAP.


The intention of the Netherlands to accept the tax treaty residency of dual resident persons in certain situations is very positive in light of the uncertainty arising from the MLI MAP provision and temporary denial of treaty benefits. However since the grandfathering of certain dual resident persons is only the position of the Netherlands, other competent authorities still may require a new MAP. Therefore, it is important to keep monitoring if a Dutch taxpayer is a dual resident person from the other competent authorities’ perspective and still needs to file a request for a MAP to be entitled to tax treaty benefits. 

Roderik Bouwman

T: +31 0 20 5419 894


Tim Mulder

T: +31 0 20 5419 276


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