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- Except as otherwise provided in this Article, a resident of a Contracting State that derives income from the other Contracting State described in paragraph 3 of Article 10, paragraph 3 of Article 11 or Article 12, 13 or 20 shall be entitled to the benefits granted for a taxable year by the provisions of those paragraphs or Articles only if such resident is a qualified person as defined in paragraph 2 and satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
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- A resident of a Contracting State is a qualified person for a taxable year only if such resident is either:
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- a)an individual;
- b)the Government of a Contracting State, any political subdivision or local authority thereof, the Bank of Japan, the Central Bank of the Netherlands or a person that is owned, directly or indirectly, by the Government of a Contracting State or a political subdivision or local authority thereof;
- c)a company, if the principal class of its shares is listed or registered on a recognised stock exchange and is regularly traded on one or more recognised stock exchanges, provided that, if the shares are listed or registered on a recognised stock exchange specified in clause (iii) or (iv) of subparagraph c) of paragraph 8, the primary place of management and control of the company is in the Contracting State of which it is a resident;
- d)a person that is either:
- (i)a person as described in subparagraph b) or c) of paragraph 1 of Article 4, provided that in the case of a person described in subparagraph b) of that paragraph:
- (aa)as of the end of the prior taxable year more than 50 per cent of the person’s beneficiaries, members or participants are individuals who are residents of either Contracting State; or
- (bb)more than 75 per cent of the contributions made to the person is derived from residents of either Contracting State which are qualified persons; or
- (ii)a bank, an insurance company or a securities company that is established and regulated as such under the laws of the Contracting State of which it is a resident; or
- e)a person other than an individual, if residents of either Contracting State that are qualified persons by reason of subparagraph a), b), c) or d) of this paragraph own, directly or indirectly, shares or other beneficial interests representing at least 50 per cent of the voting power of the person.
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- Notwithstanding that a company that is a resident of a Contracting State may not be a qualified person, that company shall be entitled to the benefits granted by the provisions of paragraph 3 of Article 10, paragraph 3 of Article 11 or Article 12, 13 or 20 with respect to an item of income described in those paragraphs or Articles derived from the other Contracting State if that company satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits and shares representing at least 75 per cent of the voting power of that company are owned, directly or indirectly, by seven or fewer persons who are equivalent beneficiaries.
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- Where the provisions of subparagraph e) of paragraph 2 or paragraph 3 apply:
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- a)in respect of taxation by withholding at source, a resident of a Contracting State shall be considered to satisfy the conditions described in that subparagraph or paragraph for the taxable year in which the payment of an item of income is made if such resident satisfies those conditions during the twelve month period preceding the date of the payment or, in the case of dividends, the date on which entitlement to the dividends is determined; and
- b)for all other cases, a resident of a Contracting State shall be considered to satisfy the conditions described in that subparagraph or paragraph for the taxable year in which the item of income is derived if such resident satisfies those conditions on at least half the days of the taxable year.
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- a)Notwithstanding that a resident of a Contracting State may not be a qualified person, that resident shall be entitled to the benefits granted by the provisions of paragraph 3 of Article 10, paragraph 3 of Article 11 or Article 12, 13 or 20 with respect to an item of income described in those paragraphs or Articles derived from the other Contracting State if:
- (i)that resident is carrying on business in the first-mentioned Contracting State (other than the business of making or managing investments for the resident’s own account, unless the business is banking, insurance or securities business carried on by a bank, insurance company or securities company);
- (ii)the item of income derived from that other Contracting State is derived in connection with, or is incidental to, that business; and
- (iii)that resident satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
- b)If a resident of a Contracting State derives an item of income from a business carried on by that resident in the other Contracting State or derives an item of income arising in the other Contracting State from any of its associated enterprises carrying on business in that other Contracting State, the conditions described in subparagraph a) shall be considered to be satisfied with respect to such item of income only if the business carried on in the first-mentioned Contracting State is substantial in relation to the business carried on in the other Contracting State. Whether such business is substantial for the purposes of this paragraph shall be determined based on all the facts and circumstances.
- c)In determining whether a person is carrying on business in a Contracting State under subparagraph a), the business conducted by a partnership in which that person is a partner and the business 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 owns, directly or indirectly, at least 50 per cent of the beneficial interest in the other (or, in the case of a company, shares representing at least 50 per cent of the voting power of the company) or a third person owns, directly or indirectly, at least 50 per cent of the beneficial interest (or, in the case of a company, shares representing at least 50 per cent of the voting power of the company) in each person. In any case, a person shall be considered to be connected to another if, on the basis of all the facts and circumstances, one has control of the other or both are under the control of the same person or persons.
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- a)Notwithstanding that a resident of a Contracting State may not be a qualified person, that resident shall be entitled to the benefits granted by the provisions of paragraph 3 of Article 10, paragraph 3 of Article 11 or Article 12, 13 or 20 with respect to an item of income described in those paragraphs or Articles derived from the other Contracting State if:
- (i)that resident functions as a headquarters company for a multinational corporate group;
- (ii)the item of income derived from that other Contracting State either is derived in connection with, or is incidental to, the business referred to in clause (ii) of subparagraph b); and
- (iii)that resident satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits.
- b)A resident of a Contracting State shall be considered a headquarters company for a multinational corporate group for the purpose of subparagraph a) only if:
- (i)that resident provides a substantial portion of the overall supervision and administration of the group or provides financing for the group;
- (ii)the group consists of companies which are resident in, and are carrying on business in, at least five countries, and the business carried on in each of the five countries generates at least 5 per cent of the gross income of the group;
- (iii)the business carried on in any one country other than that Contracting State generate less than 50 per cent of the gross income of the group;
- (iv)no more than 50 per cent of its gross income is derived from the other Contracting State;
- (v)that resident has, and exercises, independent discretionary authority to carry out the functions referred to in clause (i); and
- (vi)that resident is subject to the same income taxation rules in that Contracting State as persons described in paragraph 5.
- c)For the purpose of subparagraph b), a resident of a Contracting State shall be deemed to satisfy the gross income requirements described in clause (ii), (iii) or (iv) of that subparagraph for the taxable year in which the item of income is derived if the resident satisfies each of those gross income requirements when averaging the gross income of the three taxable years preceding that taxable year.
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- A resident of a Contracting State that is neither a qualified person nor entitled under paragraph 3, 5 or 6 to the benefits granted by the provisions of paragraph 3 of Article 10, paragraph 3 of Article 11 or Article 12,13 or 20 with respect to an item of income described in those paragraphs or Articles shall, nevertheless, be granted such benefits if the competent authority of the other Contracting State determines, in accordance with its laws or administrative practice, that the establishment, acquisition or maintenance of such resident and the conduct of its operations did not have as one of the principal purposes the obtaining of such benefits.
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- For the purposes of this Article:
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- a)the term “principal class of shares” means the class or classes of shares of a company which in the aggregate represent a majority of the voting power of the company;
- b)the term “shares” shall include depository receipts of shares or trust certificates of shares;
- c)the term “recognised stock exchange” means:
- (i) financial instruments firms association under the Financial Instruments and Exchange Law (Law No. 25 of 1948) of Japan;
- (ii)any regulated market established in the Netherlands subject to regulation by the Authority for the Financial Markets (or its successor) under a license as meant in paragraph 1 of Article 5:26 of the Act on Financial Supervision (or its successor) of the Netherlands;
- (iii)the Irish Stock Exchange, the London Stock Exchange, the Swiss Stock Exchange and the stock exchanges of Brussels, Dusseldorf, Frankfurt, Hamburg, Hong Kong, Johannesburg, Lisbon, Luxembourg, Madrid, Mexico, Milan, New York, Paris, Seoul, Singapore, Stockholm, Sydney, Toronto and Vienna and the NASDAQ System; and
- (iv)any other stock exchange which the competent authorities of the Contracting States agree to recognise for the purposes of this Article;
- d)the term “equivalent beneficiary” means:
- (i)a resident of a state that has a convention for the avoidance of double taxation and the prevention of fiscal evasion between that state and the Contracting State from which the benefits of this Convention are claimed such that:
- (aa)that convention contains provisions for effective exchange of information;
- (bb)that resident is a qualified person under the limitation on benefits provisions in that convention or, when there are no such provisions in that convention, would be a qualified person when that convention is read as including provisions corresponding to paragraph 2; and
- (cc)with respect to an item of income referred to in paragraph 3 of Article 10, paragraph 3 of Article 11 or Article 12, 13 or 20 that resident would be entitled under that convention to a rate of tax with respect to the particular class of income for which the benefits are being claimed under this Convention that is at least as low as the rate applicable under this Convention; or
- (ii)a qualified person by reason of subparagraph a), b), c) or d) of paragraph 2;
- e)the term “associated enterprises” means enterprises which have a relationship with each other as described in subparagraph a) or b) of paragraph 1 of Article 9; and
- f)the term “gross income” means the total revenues derived by an enterprise from its business, less the direct costs of obtaining such revenues.
