Article 21 ENTITLEMENT TO BENEFITS
Article 21
ENTITLEMENT TO BENEFITS
1. Except as otherwise provided in paragraphs 3, 4 and 5 of this Article, a resident of a Contracting State shall not be entitled to a benefit that would otherwise be accorded by the provisions of paragraph 3 of Article 10, paragraph 1 of Article 11 or paragraph 1 of Article 12 of this Convention, unless such resident is a qualified person as defined in paragraph 2 of this Article at the time that the benefit would be accorded.
2. A resident of a Contracting State shall be a qualified person at a time when a benefit would otherwise be accorded by the provisions referred to in paragraph 1 of this Article if, at that time, the resident is:
(a) an individual;
(b) that Contracting State, any subdivision or local authority thereof, or an agency or instrumentality of such Contracting State, 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 pension fund, if, at the beginning of the taxable year for which the claim to the benefit is made, at least 50 per cent of its beneficiaries, members or participants are individuals who are residents of either Contracting State; or
(e) a person other than an individual, 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 residents of that Contracting State and that are entitled to benefits referred to in paragraph 1 of this Article under subparagraph (a), "b", "c" or "d" of this paragraph own, directly or indirectly, at least 50 per cent of the shares of the person.
3. A resident of a Contracting State that is not a qualified person pursuant to the provisions of paragraph 2 of this Article shall also be entitled to a benefit that would otherwise be accorded by the provisions of paragraph 3 of Article 10, paragraph 1 of Article 11 or paragraph 1 of Article 12 of this Convention with respect to an item of income described in the respective paragraph if:
(a) in the case of a pension fund, at the beginning of the taxable year for which the claim to the benefit is made, at least 75 per cent of its beneficiaries, members or participants are individuals who are equivalent beneficiaries; or
(b) in all other cases, 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 shares of the resident.
4. (a) A resident of a Contracting State shall be entitled to a benefit that would otherwise be accorded by the provisions of paragraph 3 of Article 10, paragraph 1 of Article 11 or paragraph 1 of Article 12 of this Convention with respect to an item of income described in the respective paragraph that is derived from the other Contracting State, regardless of whether the resident is a qualified person, if the resident is engaged in a business activity in the first-mentioned Contracting State, and the income derived from the other Contracting State emanates from, or is incidental to, that business activity. For purposes of this paragraph, the term "a business activity" 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) of this paragraph shall be considered to be satisfied with respect to such item of income only if the business activity carried on by the resident in the first-mentioned Contracting State to which the item of income is related is substantial in relation to the same business 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, business activities conducted by connected persons with respect to a resident of a Contracting State shall be deemed to be conducted by such resident.
5. If a resident of a Contracting State is neither a qualified person pursuant to the provisions of paragraph 2 of this Article, nor entitled to benefits under paragraph 3 or 4 of this Article, the competent authority of the other Contracting State may, nevertheless, grant the benefits accorded by the provisions of paragraph 3 of Article 10, paragraph 1 of Article 11 or paragraph 1 of Article 12 of this Convention with respect to an item of income described in the respective paragraph, taking into account the object and purpose of this Convention, 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 such benefits. 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.
6. For the purposes of the preceding paragraphs of this Article:
(a) the term "principal class of shares" means the class or classes of shares of a company which represents in the aggregate 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 the majority of the aggregate vote and value of the entity;
(b) 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;
(c) life 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, this Convention or any other international instrument which are equivalent to benefits to be accorded to that item of income under the provisions of paragraph 3 of Article 10, paragraph 1 of Article 11 or paragraph 1 of Article 12 of this Convention;
(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.
7. (a) Where:
(i) an enterprise of a Contracting State derives income from the other Contracting State and the first-mentioned Contracting 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 exempt from tax in the first-mentioned Contracting State,
the benefits under this Convention shall not apply to any item of income on which the tax in the third jurisdiction is less than 60 per cent of the tax that would be imposed in the first-mentioned Contracting State on that item of income if that permanent establishment were situated in the first-mentioned Contracting 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 Contracting State, notwithstanding any other provisions of this Convention.
(b) The provisions of subparagraph (a) of this paragraph shall not apply if the income derived from the other Contracting State described in that subparagraph is derived in connection with 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 the benefits under this Convention are denied pursuant to the provisions of subparagraph (a) of this paragraph with respect to an item of income derived by a resident of a Contracting State, the competent authority of the other Contracting State may, nevertheless, grant these benefits with respect to that item of income if, in response to a request by such resident, such competent authority determines that granting such benefits is justified in light of the reasons such resident did not satisfy the requirements of the subparagraphs (a) and (b) of this paragraph. The competent authority of the Contracting State to which a request has been made under the preceding sentence by a resident of the other Contracting State shall consult with the competent authority of that other Contracting State before either granting or denying the request.
8. Notwithstanding the other provisions of this Convention, a benefit under this Convention 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 this Convention.