MLI Matching Overview

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

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.