Dutch Supreme Court interprets treaty concept “managed and controlled”


Dutch Supreme Court interprets treaty concept “managed and controlled”

The tax treaty between the Netherlands and Singapore includes a special provision to determine the residency of a company with a double place of residence. The Supreme Court recently explained this provision in more detail.

24 january 2018

Dutch version

The Dutch Supreme Court recently issued a ruling that interprets the concept of “managed and controlled” in the Netherlands-Singapore tax treaty to determine a company’s residence.

Facts and circumstances

The taxpayer, an investment company, was incorporated under Dutch law. The sole shareholder of the investment company was a Dutch resident, while its directors resided in Singapore.


A company’s place of residence can be determined based on the laws of its country of incorporation, but also by factually establishing where it has its place of effective management. Both criteria do not necessarily produce the same result. Many tax treaties therefore include a provision to solve such a conflict and determine where a company has its residence for treaty purposes.

The Netherlands-Singapore tax treaty also includes such a tiebreaker rule. Contrary to the tiebreaker rule that generally refers to the “place of effective management”, this rule provides that a company has its residence where it is “managed and controlled”. Since Dutch legislation does not further explain the concept of “managed and controlled”, the Dutch Supreme Court was requested to provide clarification.


The Supreme Court observed that the term “managed and controlled” is to be interpreted in its context and in the light of the subject matter and the objective of the treaty. According to the Supreme Court, this the place is where key decisions are made about the entity’s activities, where ultimate responsibility for these decisions rests and from which instructions are given - when appropriate to persons employed by the entity. To determine the place of management and control of a company, it is not relevant who performs the daily management of business operations.

In this case, the taxpayer’s place of management and control is the Netherlands, based on the previous factual observation by the The Hague Court of Appeal. The Supreme Court upholds this qualification.

Impact on other treaties

In its ruling, the Supreme Court interprets the criterion of “managed and controlled”, which is comparable to the concept of “place of effective management”. The latter concept plays a much more prominent role in tax treaties concluded by the Netherlands. However, the tax treaties that the Netherlands has entered into with Ireland and South-Korea also include the concept of “managed and controlled” and are thus affected by the present ruling.

Source: Supreme Court of 19 January 2018, no 16/03321, ECLI:NL:HR:2018:47.

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