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TMI BlogArticle 29 - Entitlement to BenefitsX X X X Extracts X X X X X X X X Extracts X X X X ..... e Business Treaty benefits to certain income derived by a person that is not a qualified person if the person is engaged in the active conduct of a business in its State of residence and the income emanates from, or is incidental to, that business. [ Para 3 of Article 28 ] Treaty benefits to a person that is not a qualified person if at least more than an agreed proportion of that entity is owned by certain persons entitled to equivalent benefits. [ Para 4 of Article 28 ] List of Qualified Person Treaty benefits to a person that qualifies as a headquarters company . [ Para 5 of Article 28 ] That allows the competent authority of a Contracting State to grant certain treaty benefits to a person where benefits would otherwise be denied under paragraph 1. [ Para 6 of Article 28 ] Paragraph 8 a) Where (i) an enterprise of a Contracting State derives income from the other Contracting State and the first-mentioned State treats such income as attributable to a permanent establishment of the enterprise situated in a third jurisdiction, and (ii) the profits attributable to that permanent establishment are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of this Convention. [ Para 9 of Article 28 ] As per UN Model Tax Convention Provision denying treaty benefits to a resident of a Contracting State who is not a qualified person Except as otherwise provided in this Article, a resident of a Contracting State shall not be entitled to a benefit that would otherwise be accorded by this Convention (other than a benefit under paragraph 3 of Article 4, paragraph 2 of Article 9 or Article 25) unless such resident is a qualified person , as defined in paragraph 2, at the time that the benefit would be accorded. [ Para 1 of Article 29 ] Situations where a resident is a qualified person A resident of a Contracting State shall be a qualified person at a time when a benefit would otherwise be accorded by the Convention 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 that State, political subdivision or local authority; (c) a company or other entity, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting State and that are entitled to the benefits of this Convention under subparagraph (a), (b), (c) or (e) own, directly or indirectly, shares representing at least 50 per cent of the aggregate vote and value (and at least 50 per cent of the aggregate vote and value of any disproportionate class of shares) of the shares in the person, provided that, in the case of indirect ownership, each intermediate owner is a qualifying intermediate owner, and (ii) less than 50 per cent of the person s gross income, and less than 50 per cent of the tested group s gross income, for the taxable period that includes that time, is paid or accrued, directly or indirectly, in the form of payments that are deductible for purposes of the taxes covered by this Convention in the person s Contracting State of residence (but not including arm s length payments in the ordinary course of business for services or tangible property, and in the case of a tested group, not including intra-group transactions), to persons that are not residents of either Contracting State entitled to the benefits of this Convention under subparagraph (a), (b), (c) or (e) of this paragraph; or (g) a collective investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Headquarters company A company that is a resident of a Contracting State that functions as a headquarters company for a multinational corporate group consisting of such company and its direct and indirect subsidiaries shall be entitled to benefits under this Convention with respect to dividends and interest paid by members of its multinational corporate group, regardless of whether the resident is a qualified person. A company shall be considered a headquarters company for this purpose only if: (a) such company s primary place of management and control is in the Contracting State of which it is a resident; (b) the multinational corporate group consists of companies resident of, and engaged in the active conduct of a business in, at least four States, and the businesses carried on in each of the four States (or four groupings of States) generate at least 10 per cent of the gross income of the group; (c) the businesses of the multinational corporate group that are carried on in any one State other than the Contracting State of residence of such company generate less than 50 per cent of the gross income of the group; (d) no more than 25 per cent of such company s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this and the previous paragraphs of this Article: (a) the term recognised stock exchange means: (i) list of stock exchanges agreed to at the time of signature; and (ii) any other stock exchange agreed upon by the competent authorities of the Contracting States; (b) with respect to entities that are not companies, the term shares means interests that are comparable to shares; (c) the term principal class of shares means the ordinary or common shares of the company or entity, provided that such class of shares represents the majority of the aggregate vote and value of the company or entity. If no single class of ordinary or common shares represents the majority of the aggregate vote and value of the company or entity, the principal class of shares are those classes that in the aggregate represent a majority of the aggregate vote and value; (d) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with respect to the company seeking benefits shall be deemed to be conducted by such company. Whether a business activity is substantial shall be determined based on all the facts and circumstances; and (II) if the resident is a company (including an individual treated as a company), to determine whether the resident is entitled to a rate of tax that is less than or equal to the rate applicable under this Convention, the resident s indirect holding of the capital of the company paying the dividends shall be treated as a direct holding; or (2) with respect to an item of income referred to in Article 7, 13 or 21 of this Convention, the resident is entitled to benefits under such Convention that are at least as favourable as the benefits that are being sought under this Convention; and (C) notwithstanding that a resident may satisfy the requirements of clauses (A) and (B) of this subdivision, where the item of income has been derived through an entity that is treated as fiscally transparent under the laws of the Contracting State of residence of the company seeking benefits, if the item of income would not be treated as the income of the resident under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its direct and indirect subsidiaries, and the staff of such persons conduct more of the day-to-day activities necessary for preparing and making those decisions, in that Contracting State than in any other State ; and (ii) such executive officers and senior management employees exercise day-to-day responsibility for more of the strategic, financial and operational policy decision-making for the company or entity and its direct and indirect subsidiaries, and the staff of such persons conduct more of the day-to-day activities necessary for preparing and making those decisions, than the officers or employees of any other company or entity ; (h) the term qualifying intermediate owner means an intermediate owner that is either: (i) a resident of a State that has in effect with the Contracting State from which a benefit under this Convention is being sought a comprehensive convention for the avoidance of double taxation; or (ii) a resident of the same Contracting State as the company applying the test under subparagraph (d) or (f) of paragraph 2 or paragraph 4 to determine whether it is eligible for benefits under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion shall not apply to any item of income on which the tax in the third jurisdiction is less than the lower of [rate to be determined bilaterally] of the amount of that item of income and 60 per cent of the tax that would be imposed in the first-mentioned State on that item of income if that permanent establishment were situated in the first-mentioned State. In such a case any income to which the provisions of this paragraph apply shall remain taxable according to the domestic law of the other State, notwithstanding any other provisions of the Convention. (b) The preceding provisions of this paragraph shall not apply if the income derived from the other State emanates from, or is incidental to, the active conduct of a business carried on through the permanent establishment other than the business of making, managing or simply holding investments for the enterprise s own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively. (c) If benefits under this Convention are denied pursuant to the preceding provisions of this paragraph with respect to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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