Belgian Ratification of the MLI: Ratification document deposited at OECD on 26 June 2019


On 6 June 2019, the legislative documents implementing the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (also known as the MLI) were finally approved by all six legislative authorities in Belgium. The Belgian law ratified the full application of the MLI and its Explanatory Note, the reservations and notifications made by Belgium, and the amendments made since the signing of the instrument. On 26 June 2019, the ratification instrument was deposited with the OECD (Depositary of the MLI).

Short recap 

In order to implement the tax treaty-related measures of the BEPS project in existing bilateral tax treaties, a large number of countries have adopted a multilateral instrument that changes these treaties instead of re-negotiating bilateral tax treaties separately, which is a major innovative development in international tax law. The MLI contains a number of minimum standards that should be introduced in the participating countries while other provisions only concern recommendations or are optional provisions (opt-in or opt-out). 

As per today, the number of MLI signatories is 87, coming from 68 at the time of signing on 7 June 2017. Belgium initially notified 98 bilateral tax treaties as being a covered tax agreement (excluding the Netherlands, Japan, Germany, Norway and Switzerland). Given the reciprocity needed to change an existing treaty, it is expected that 56 of the Belgian tax treaties will be altered by the MLI. 

Compared to the notifications and reservations made at the time of signing of the MLI, two material changes have been made by Belgium in the final ratification document: 

  • the tax treaty with the Netherlands is now included in the list of Covered Tax Agreements, and
  • Belgium no longer makes a reservation regarding the broader definition of personnel permanent establishments/dependent agents. The latter is in line with the mere economic approach as already incorporated following the Belgian tax reform (applicable as from 2020 – see our tax reform website). 


Entry into force for Belgium

For Belgium the MLI will enter into force on 1 October 2019.


Entry into effect for Belgium

For Belgium the MLI will enter into effect for withholding taxes levied on or after 1 January 2020 and, for other taxes, for taxable periods beginning on or after 1 April 2020.


Belgian positions taken

Below we will briefly discuss a number of important positions of Belgium. For more extensive information on the MLI, reference is made to the PwC Central Tax Policy Leadership Bulletin

Permanent establishments 

The MLI includes various articles which substantially broaden the definition of permanent establishment (“PE”). 

Firstly, article 12 of the MLI broadens the PE definition with commissionaires and similar strategies. The PE definition now states that a person who “habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise and these contracts are in the name of the enterprise, or for the transfer of the ownership […], or for the provision of services […]” will be considered as a permanent establishment of that enterprise.

Also, under article 13 of the MLI, jurisdictions have two options to implement the specific activity exemption. Belgium chose for option B whereby the current exceptions for certain preparatory or auxiliary activities as provided under the Covered Tax Agreements are maintained. Nevertheless, following the introduction of anti-fragmentation rules, the activities performed by several related parties are to be combined when assessing whether they can be regarded as being of a preparatory or an auxiliary nature (Belgium decided not to make a reservation). 

Finally, article 14 of the MLI tackles the splitting-up of contracts of construction projects with the objective to avoid the time threshold being exceeded and the PE status consequently being assigned. Belgium decided to make a reservation against this new provision. Nevertheless, it is generally acknowledged that the intentional splitting up of contracts risks being challenged by the tax authorities via the Principal Purpose Test.

Principal Purpose Test 

The MLI introduces a stringent general anti-abuse rule to tackle treaty abuse in Belgian tax treaties via the Principal Purpose Test (PPT). Belgium – similar to most jurisdictions – chose to apply the PPT without a simplified LOB. For this rule to be applicable, the tax authorities are only required to reasonably prove that obtaining a treaty benefit was one of the principal purposes of entering into the specific transaction or arrangement. In a second step, the taxpayer can provide proof that granting the treaty benefit was in accordance with the object and purpose of the relevant treaty. 

Mutual Agreement Procedure

Within the MLI, article 16 provides a minimum standard for contracting states to allow taxpayers to present their case to the competent authority of each contracting state within three years from the first notification of the action resulting in taxation not in accordance with the bilateral tax treaty. If the objection of the taxpayer is justified, and the competent authorities cannot individually resolve the case, the competent authorities should try to resolve the case by mutual agreement. The agreement reached should then be implemented regardless of any time limits under national law of the respective jurisdictions. 


Belgium is one of the 28 jurisdictions that opted in for the Arbitration procedure. With regard to the type of arbitration, i.e. the (i) final offer arbitration process or (ii) the independent opinion approach, Belgium selected the first default arbitration type and made no reservation with regard to the second type so as to ensure the applicability of arbitration with parties who chose the latter option. 


What should businesses do? 

As the scope of the MLI is very broad and covers many topics such as treaty clauses in relation to withholding taxes, capital gains taxation, PE assessment and MAP, businesses should think through the consequences of the implementation of the MLI for their international flows and structures as the MLI will impact a significant amount of double tax treaties. 

Without proper monitoring of the MLI effect, multinational groups will likely be confronted with increased double taxation exposure and lengthy discussions with the tax authorities. One should therefore examine the specific effect of the MLI on each relevant tax treaty, assess the concrete consequences for the multinational group, and take action where needed. This should be part of every group’s tax strategy and control framework in order to create a sustainable and defendable policy going forward. 

For more insights and to understand the implications of the MLI for your organisation, please reach out to your regular PwC-advisor or contact Annelies Butaye /Stefaan De Baets.