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Thursday, 20 October 2022

International Tax Update: Arbitration procedures between the Netherlands and Luxembourg can take off

Rik Smet

Rik Smet

Senior Associate
Jacob Huyzentruyt

Jacob Huyzentruyt


The so-called multilateral instrument (‘MLI’) provides for a simultaneous modification of all double tax treaties which are considered by both signatories of the MLI as a ‘covered agreement’. The MLI also provides for an optional arbitration procedure, to which, however, a relatively limited amount of jurisdictions. For the part of the MLI regarding arbitration to apply, both jurisdictions have to opt-in, but depending on their respective reservations made, the exact form of this arbitration may differ from one MLI covered tax treaty to another.

In order for the arbitration provisions (part VI of the MLI) to enter into force, the relevant competent authorities have to mutually agree on how these provisions will be applied via a so-called “competent authority mutual agreement”. These agreements will determine how cases will be dealt with by the authorities. In principle, the MLI arbitration provisions will have effect with respect to cases presented to the competent authority of a Contracting State after the MLI has entered into force for each of the Contracting States. However, they could also agree that pending cases are dealt with according to the new MLI arbitration procedure.

Previously, we wrote that Belgium was the first to adopt such agreement, more specifically regarding the double tax treaty with Australia. Beside the agreement between Belgium and Australia, few other agreements have been concluded until now. Thus, the relevance and impact of part VI has remained limited to date.

Recently, such agreement was concluded between the Netherlands and Luxembourg. The competent authorities of both countries published a mutual agreement on the implementation of part VI of the MLI to establish the mode of application of the arbitration procedure. By concluding this agreement, both states have ‘activated’ part VI of the MLI and enabled possible arbitration procedures between both states.

The agreement stipulates that the arbitration provisions will apply to cases presented to the competent authority of the Netherlands and/or Luxembourg as from 1 August 2019. Regarding mutual agreement cases prior to 1 August 2019, Part VI of the MLI will apply only to the extent that the competent authorities mutually agree – on a case by case basis – on the application of the MLI arbitration provisions.

In conclusion, entities faced with an unresolved issue regarding the application of the double tax treaty between Luxembourg and the Netherlands, after 1 August 2019, may submit their case to arbitration foreseen by the recently adopted competent authority mutual agreement.


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,;

Ahmed El Jilali (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,

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.

Rik Smet

Rik Smet

Senior Associate
Jacob Huyzentruyt

Jacob Huyzentruyt

Tiberghien Brussels

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