Article 28 - Limitation of Benefits - Armenia

ARTICLE 28 LIMITATION OF BENEFITS 1. Except as otherwise provided in this, Article, a resident of a Contracting State who derives income from the other Contracting State shall be entitled to all the benefits of this Convention otherwise accorded to residents of a Contracting State only if such resident is a qualified person as defined in paragraph 2 and meets the other conditions of this Convention for the obtaining of such benefits. 2. A resident of a Contracting State is a qualified person for a fiscal year only if such resident is either: (a) an individual; (b) a qualified governmental entity; (c) a company, if (i) the principle class of its shares is listed on a recognized stock exchange specified in sub-paragraph (a) or (b) of paragraph 6 and is regularly traded on one or more recognized stock exchanges; or (ii) at least 50 per cent of the aggregate vote and value of the shares in the company is owned directly or indirectly by five or fewer companies entitled to benefits under sub-division (i) of this sub-paragraph, provided that, in the case of indirect ownership, each intermediate owner is a resident of either Contracting State; (d) A charity or other tax-exempt entity, provided that, in the case of a pension trust or any other organization that is established exclusively to provide pension or other similar benefits, more than 50 per cent of the person's beneficiaries, members or participants are individuals resident in either Contracting State; or (e) a person other than an individual, if : (i) on at least half the days of the fiscal year persons that are qualified persons by reason of sub-paragraph (a), (b) or (d) or sub-division (c)(i) of this paragraph own, directly or indirectly, at least 50 per cent of the aggregate vote and value of the shares or other beneficial interests in the person; and (ii) less than 50 per cent of the person's gross income for the taxable year is paid or accrued, directly or indirectly, to persons who are not residents of either Contracting State in the form of payments that are deductible for purposes of the taxes covered by this Convention in the person's State of residence (but not including arm's length payments in the ordinary course of business for serviced or tangible property and payments in respect of financial obligations to a bank, provided that where such a bank is not a resident of a Contracting State such payment is attributable to a permanent establishment of that bank located in one of the Contracting States). 3. (a) A resident of a Contracting State will be entitled to benefits of the Convention with respect to an item of income, derived from the other State, regardless of whether the resident is a qualified person, if the resident is actively carrying on business in the first-mentioned State (other than the business of making or managing investments for the resident's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance company or registered securities dealer), the income derived from the other Contracting State is derived in connection with, or is incidental to, that business and that resident satisfies the other conditions of this Convention for the obtaining of such benefits. (b) If the resident or any of its associated enterprises carries on a business activity in the other Contracting State which gives rise to an item of income, sub-paragraph (a) shall apply to such item only if the business activity in the first-mentioned State is substantial in relation to business carried on in the other State. Whether a business activity is substantial for purposes of this paragraph will be determined based on all the facts and circumstances. (c) In determining whether a person is actively carrying on business in a Contracting State under sub-paragraph (a), activities conducted by a partnership in which that person is a partner and activities conducted by persons connected to such person shall be deemed to be conducted by such person. A person shall be connected to another if one possesses at least 50 per cent of the beneficial interest in the other (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the company's shares) or another person possesses, directly or indirectly, at least 50 per cent of the beneficial interest (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the company's shares) in each person. In any case, a person shall be considered to be connected to another if, based on all the facts and circumstances, one has control of the other or both are under the control of the same person or persons. 4. Notwithstanding the preceding provisions of this Article, if a company that is a resident of a Contracting State, or a company that controls such a company, has outstanding a class of shares. (a) which is subject to terms or other arrangements which entitle its holders to a portion of the income of the company derived from the other Contracting State that is larger than the portion such holders would receive absent such terms of arrangements ( the disproportionate part of the income ); and (b) 50 per cent or more of the voting power and value of which is owned by persons who are not qualified persons. The benefits of this Convention shall not apply to the disproportionate part of the income. 5. A resident of a Contracting State that is neither a qualified person pursuant to the provisions of paragraph 2 or entitled to benefits under paragraph 3 or 4 shall, nevertheless, be granted benefits of the Convention if the competent authority of that other Contracting State determines that the establishment, acquisition or maintenance of such person and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the Convention. 6. For the purposes of this Article the term recognized stock exchange means: (a) in India, a stock exchange which is for the time being recognized by the Central Government under section 4 of the Securities Contracts (Regulation) Act, 1956; (b) in Armenia, ARMMEX; and (c) any other stock exchange which the competent authorities agree to recognise for the purposes of this article.