Weekly tax updates 24-06-21

Tax Thursday – The Netherlands and Germany amend double tax treaty


On March 24, 2021 the Netherlands and Germany have signed a protocol to amend the tax treaty concluded between both states. The changes made to the tax treaty are in line with multiple provisions of the Multilateral Instrument (‘MLI’). The protocol also amends the allocation of taxation rights with respect to certain social security benefits.

Most relevant amendments

  • The specific activity exemption for permanent establishments will only apply if these activities are of preparatory or auxiliary nature.
  • A minimum holding period of 365 days will apply in order to benefit from the reduced dividend withholding tax rate.
  • A 365 day testing period will be included in the real estate shares clause. This means that the scope of the definition of real estate shares will be broadened.
  • An anti-abuse measure for permanent establishments located in third countries will be introduced.
  • In accordance with the principles of the MLI, a principal purpose test will be included in the tax treaty.


The amendments will be entering into force once both states have finalized their own ratification procedure. The amendments might have effect on already existing business structures. Especially the 365 day period in the dividend and real estate shares clause might impact already existing structures. It is therefore recommended to assess whether your business will be affected by the aforementioned amendments.


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