Article 24 - Limitation of Benefits - Iceland

ARTICLE 24 LIMITATION OF BENEFITS [REPLACED by paragraphs 8 through 13 of Article 7 of the MLI] [1. Except as otherwise provided in this Article, a person (other than an individual), which is a resident of a Contracting State and which derives income from the other Contracting State shall be entitled to all the benefits of this Agreement otherwise accorded to residents of a Contracting State only if such a person is a qualified person as defined in paragraph 2 and meets the other conditions of this Agreement for the obtaining of any of such benefits. 2. A person of a Contracting State is a qualified person for a fiscal year only if such a person is either: a) Governmental entity; or b) a company incorporated in either of the Contracting States, if (i) the principal class of its shares is listed on a recognised stock exchange as defined in paragraph 5 of this Article and is regularly traded on one or more recognised stock exchanges; or (ii) at least 50 per cent of the aggregate vote or value of the shares in the company is owned directly or indirectly by one or more individuals residents of either of the Contracting States or/and by other persons incorporated in either of the Contracting States, at least 50 per cent of the aggregate vote or value of the shares or beneficial interest of which is owned directly or indirectly by one or more individuals residents of either of the Contracting States; or c) a partnership or association of persons, at least 50 per cent of whose beneficial interests is owned by one or more individuals residents of either of the Contracting States or/and by other persons incorporated in either of the Contracting States, at least 50 per cent of the aggregate vote or value of the shares or beneficial interest of which is owned directly or indirectly by one or more individuals residents of either of the Contracting States; or d) a charitable institution or other tax-exempt entity whose main activities are carried on in either of the Contracting States: Provided that the persons mentioned above will not be entitled to the benefits of the agreement if more than 50 per cent of the person's gross income for the taxable year is paid or payable directly or indirectly to persons who are not residents of either of the Contracting States in the form of payments that are deductible for the purpose of computation of tax covered by this Agreement in the person's State of residence (but not including arm's length payment in the ordinary course of business for services or tangible property and payments in respect of financial obligations to a bank incurred in connection with a transaction entered into with the permanent establishment of the bank situated in either of the Contracting States). 3. The provisions of paragraphs 1 and 2 shall not apply and a resident of a Contracting State will be entitled to benefits of the Agreement with respect to an item of income derived from the other Contracting State, if the person actively carries on business in the State of residence (other than the business of making or managing investments for the resident's own account unless these activities are banking, insurance or security activities) and the income derived from the other Contracting States is derived in connection with or is incidental to that business and that resident satisfies the other conditions of this Agreement for the obtaining of such benefits. 4. A resident of a Contracting State shall nevertheless be granted the benefits of the Agreement if the competent authority of the other Contracting State determines that the establishment or 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 agreement. 5. For the purposes of this Article the term recognised stock exchange means a) in India: i) the National Stock Exchange; ii) the Bombay Stock Exchange; iii) any other stock exchange recognised by the Securities and Exchange Board of India; b) in Iceland: i) the Icelandic Stock Exchange; ii) the Stock Exchanges of Amsterdam, Brussels, Copenhagen, Frankfurt, Hamburg, Helsinki, London, Oslo, Paris, Stockholm, Sydney, Tokyo, and Toronto; and c) any other stock exchange which the competent authorities agree to recognise for the purposes of this Article.] The following paragraphs 8 through 13 of Article 7 of the MLI replaces paragraphs 1 to 5 of Article 24 of this Agreement: ARTICLE 7 OF THE MLI PREVENTION OF TREATY ABUSE (Simplified Limitation on Benefits Provision) Except as otherwise provided in the Simplified Limitation on Benefits Provision, a resident of a [1] [Contracting State] shall not be entitled to a benefit that would otherwise be accorded by [this Agreement], other than a benefit under [paragraph 3 of Article 4, paragraph 2 of Article 9 or Article 25 of this Agreement], unless such resident is a qualified person , as defined in paragraph 9 [of Article 7 of the MLI] at the time that the benefit would be accorded. Paragraph 9 of Article 7 of the MLI A resident of a [Contracting State] to [the Agreement] shall be a qualified person at a time whenc a benefit would otherwise be accorded by [the Agreement] if, at that time, the resident is: a) an individual; b) that [Contracting State], or a political subdivision or local authority thereof, or an agency or instrumentality of any such [Contracting State], political subdivision or local authority; c) a company or other entity, if the principal class of its shares is regularly traded on one or more recognised stock exchanges; d) a person, other than an individual, that: i) is a non-profit organisation of a type that is agreed to by the [Contracting States] through an exchange of diplomatic notes; or ii) is an entity or arrangement established in that [Contracting State] that is treated as a separate person under the taxation laws of that [Contracting State] and: A) that is established and operated exclusively or almost exclusively to administer or provide retirement benefits and ancillary or incidental benefits to individuals and that is regulated as such by that [Contracting State] or one of its political subdivisions or local authorities; or B) that is established and operated exclusively or almost exclusively to invest funds for the benefit of entities or arrangements referred to in subdivision A); e) a person other than an individual, if, on at least half the days of a twelve-month period that includes the time when the benefit would otherwise be accorded, persons who are residents of that [Contracting State] and that are entitled to benefits of the Agreement under subparagraphs a) to d) own, directly or indirectly, at least 50 per cent of the shares of the person. Paragraph 10 of Article 7 of the MLI a) A resident of a [Contracting State] will be entitled to benefits of [the Agreement] with respect to an item of income derived from the other [Contracting State], regardless of whether the resident is a qualified person, if the resident is engaged in the active conduct of a business in the first-mentioned [Contracting State], and the income derived from the other [Contracting State] emanates from, or is incidental to, that business. For purposes of the Simplified Limitation on Benefits Provision, the term active conduct of a business shall not include the following activities or any combination thereof: i) operating as a holding company; ii) providing overall supervision or administration of a group of companies; iii) providing group financing (including cash pooling); or iv) making or managing investments, unless these activities are carried on by a bank, insurance company or registered securities dealer in the ordinary course of its business as such. b) If a resident of a [Contracting State] derives an item of income from a business activity conducted by that resident in the other [Contracting State], or derives an item of income arising in the other [Contracting State] from a connected person, the conditions described in subparagraph a) shall be considered to be satisfied with respect to such item only if the business activity carried on by the resident in the first-mentioned [Contracting State] to which the item is related is substantial in relation to the same activity or a complementary business activity carried on by the resident or such connected person in the other [Contracting State]. Whether a business activity is substantial for the purposes of this subparagraph shall be determined based on all the facts and circumstances. c) For purposes of applying this paragraph, activities conducted by connected persons with respect to a resident of a [Contracting State] shall be deemed to be conducted by such resident. Paragraph 11 of Article 7 of the MLI A resident of a [Contracting State] that is not a qualified person shall also be entitled to a benefit that would otherwise be accorded by [the Agreement] with respect to an item of income if, on at least half of the days of any twelve-month period that includes the time when the benefit would otherwise, be accorded, persons that are equivalent beneficiaries own, directly or indirectly, at least 75 per cent of the beneficial interests of the resident. Paragraph 12 of Article 7 of the MLI If a resident of a [Contracting State] is neither a qualified person pursuant to the provisions of paragraph 9 [of Article 7 of the MLI], nor entitled to benefits under paragraph 10 or 11 [of Article 7 of the MLI], the competent authority of the other [Contracting State] may, nevertheless, grant the benefits of [the Agreement], or benefits with respect to a specific item of income, taking int account the object and purpose of [the Agreement], but only if such resident demonstrates to the satisfaction of such competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of benefits under [the Agreement]. Before either granting or denying a request made under this paragraph by a resident of a [Contracting State], the competent authority of the other [Contracting State] to which the request has been made shall consult with the competent authority of the first-mentioned [Contracting State]. Paragraph 13 of Article 7 of the MLI For the purposes of the Simplified Limitation on Benefits Provision: a) the term recognised stock exchange means: i) any stock exchange established and regulated as such under the laws of either [Contracting State]; and ii) any other stock exchange agreed upon by the competent authorities of the [Contracting States]; b) the term principal class of shares means the class or classes of shares of a company which represents the majority of the aggregate vote and value of the company or the class or classes of beneficial interests of an entity which represents in the aggregate a majority of the aggregate vote and value of the entity; c) the term equivalent beneficiary means any person who would be entitled to benefits with respect to an item of income accorded by a [Contracting State] under the domestic law of that [Contracting State], [the Agreement] or any other international instrument which are equivalent to, or more favourable than, benefits to be accorded to that item of income under [the Agreement]; for the purposes of determining whether a person is an equivalent beneficiary with respect to dividends, the person shall be deemed to hold the same capital of the company paying the dividends as such capital the company claiming the benefit with respect to the dividends holds; d) with respect to entities that are not companies, the term shares means interests that are comparable to shares; e) two persons shall be connected persons if one owns, directly or indirectly, 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 owns, 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 connected to another if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same person or persons. [REPLACED by paragraph 1 of Article 7 of the MLI] [6. Notwithstanding anything contained in paragraphs 2 to 5 above, any person shall not be entitled to the benefits of this Agreement, if its affairs were arranged in such a manner as if it was the main purpose or one of the main purposes to avoid taxes to which this agreement applies.] The following paragraph 1 of Article 7 of the MLI replaces paragraphs 6 of Article 24 of this Agreement: ARTICLE 7 OF THE MLI PREVENTION OF TREATY ABUSE (Principal Purposes Test provision) Notwithstanding any provisions of [the Agreement], a benefit under [the Agreement] shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of [the Agreement]. FOOTNOTES:- 1 . The texts of the boxes in [Square brackets] and in italics throughout this document indicate minor terminology changes made to the text of the MLI.