1. A person which is a resident of a Contracting State and which derives income from sources within the other Contracting State shall not be entitled, in that other Contracting State, to the benefits of Article 6 (Income from Real Property) through Article 24 (Non- discrimination) if:
a) 50 percent or less of the beneficial interest in such person (or in the case of a company, 50 percent or less of the number of shares of any class of the company's shares) is owned, directly or indirectly, by any combination of one or more individual residents of a Contracting State or citizens of the United States;
b) the evidence of and rights to the ownership of any interests (other than interests solely as a creditor) in such person are in bearer form; or
c) more than 50 percent of the gross income of such person is used, or, for purposes of the tax laws of the Contracting State of which such person is resident, is deemed to be used, directly or indirectly, to make non-prorata distributions to, or meet liabilities (including liabilities for interest, royalties, or other expenses, the actual or deemed payment of which is allowable, in whole or in part, as a deduction for purposes of the tax laws of the Contracting State of which such person is resident) to, or to be accumulated for the benefit of, persons who are not residents of either of the Contracting States and who are not citizens of the United States.
2. The provisions of paragraph 1 (other than subparagraph (b)) shall not apply if the income derived from the other Contracting State is derived in connection with, or is incidental to, the active conduct by such person of a trade or business in the first-mentioned Contracting State (other than the business of making or managing investments for such person's, or a related person's, account).
3. The provisions of paragraph 1 shall not apply if the person deriving the income is a company which is a resident of a Contracting State in whose principal class of shares there is substantial and regular trading on a recognized stock exchange. For purposes of the preceding sentence, the term "recognized stock exchange" means:
a) the NASDAQ System owned by the National Association of Securities Dealers, Inc. and any stock exchange registered with the Securities and Exchange Commission as a national securities exchange for purposes of the Securities Exchange Act of 1934; and
b) any other stock exchange agreed upon by the competent authorities of the Contracting States.
4. Where, pursuant to any provision of this Convention, a Contracting State reduces the rate of tax on or exempts income of a person who is a resident of the other Contracting State and under the law in force in that other Contracting State such income is subject to a rate of tax or a tax burden which is substantially less than the tax which generally would be imposed by that Contracting State on such income if derived from sources within that Contracting State or on business income whether from sources within or without that Contracting State, then such reduction in rate of tax or exemption from tax shall not apply to such income. The provisions of the preceding sentence shall not apply to income of a resident of Aruba derived from the United States and qualifying for fiscal incentives under the Hotel and Industries, Real Estate Development, Free Zone or Exporting Industries ordinances of Aruba (as in effect on the date of signature of this Convention) or such fiscal incentives as the competent authorities may agree pursuant to Article 25 (Mutual Agreement Procedure).
5. The provisions of paragraphs 1 and 4 shall not apply if the person deriving the income is a company which is a resident of a Contracting State and which meets the requirements of each of the following subparagraphs:
a) the company must:
i) be one in all of whose classes of shares there is substantial and regular tradinq on a designated stock exchange (defined as any recognized stock exchange described in paragraph 3 or any other stock exchange agreed upon in letters exchanged at the time of the signing of this Convention or by the competent authorities of the Contracting States as a designated stock exchange for purposes of this subparagraph), provided that any such class may include bearer shares only if the designated stock exchange permits trading in such shares; or
ii) be one:
A) each share of stock of which is registered in the name of an ultimate beneficial owner or a bank or other financial institution which, under procedures mutually agreed to by the competent authorities, provides to such company the name, place of residence and such other information regarding the ultimate beneficial owner as may be necessary to determine the application of this paragraph,
B) which at all times during any taxable period has no fewer than 100 shareholders who include residents of no fewer than 5 countries (not including the other Contracting State),
C) of which no shareholder (including any investment adviser) other than an individual who is a resident of the same Contracting State as the company may at any time during a taxable period own, by reason of the acquisition of shares of any class of stock, more than 15 percent of the value of such class or own, by reason of the redemption of shares of any class of stock by any other person, more than 30 percent of the value of such class (such ownership to be determined by taking into account the attribution of ownership rules of section 318(a) of the U.S. Internal Revenue Code, except that "10 percent" shall be substituted for "50 percent" each time it appears therein), and
D) none of the stock of which is owned (or is considered as being owned by taking into account the attribution of ownership rules as described above) at any time during a taxable period by a person resident in the other Contracting State (except that 10 percent or less of the value of any class of the stock may be so owned by a person acting as an investment adviser to the company who is a resident of such other Contracting State or, until the expiration of five calendar years after the death of such investment adviser, by the person to whom the stock is transferred by reason of the death of the investment adviser);
b) the company must:
i) carry on all of the following functions substantially in or from such State (provided that it may obtain ancillary assistance outside such State when necessary):
A) communicating with its shareholders (including the furnishing of financial reports),
B) communicating with the general public (including the furnishing of financial reports),
C) accepting the subscriptions of new stockholders,
D) maintaining its principal corporate records and books of account,
E) auditing its books of account,
F) disbursing payments of dividends, legal fees, accounting fees, and officers' and directors' salaries,
G) publishing or furnishing the offering and redemption price of the shares of stock issued by it,
H) conducting meetings of its shareholders and the annual meeting of its board of directors, and
I) making redemptions of its own stock;
ii) not solicit sales of its own stock in the other Contracting State; and
iii)
A) meet the requirement that 50 percent or more of the investment advisory fees it incurs are paid to an investment adviser who is a resident of the same Contracting State as the company and who performs substantial investment advisory activities in such State (provided that such investment adviser may obtain ancillary assistance outside that State if the expenses incurred for such assistance do not exceed 50 percent of the fees paid to such investment adviser); or
B) meet the requirement that 25 percent or more of the fees it incurs for administrative services, printing services, auditing and other accounting services, custodian services, and recurring legal services (not including litigation) are paid to a resident of the same Contracting State as the company for services performed in, or by individual residents of, such State; and
c) the company may not at any time during a taxable period:
i) have more than 10 percent of the value of its assets invested in any one issuer (other than in government securities and bank deposits);
ii) hold 10 percent or more of the outstanding voting securities of any one issuer; or
iii) make any loans other than to invest in publicly traded debt obligations or in deposits with persons carrying on the banking business or in obligations the interest on which is not taxable to such company under the laws of the other Contracting State; and
d) the company must be engaged primarily in the business of investing, reinvesting, or trading (other than as a dealer) in any interest (including a futures or forward contract or option) in securities (defined as any "security" described in section 2(a)36 of the Investment Company Act of 1940, as amended) or commodities of a kind customarily dealt in on an organized commodity exchange in transactions of a kind customarily consummated at such place, and must derive at least 90 percent of its gross income for each taxable period from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of commodities or securities (as so defined).
For purposes of this paragraph, the failure of the company to satisfy the requirements of subparagraphs 5(a)(ii)(B), 5(a)(ii)(C), 5(a)(ii)(D), 5(c)(i), or 5(c)(ii) (or such other requirements as the competent authorities may mutually agree), by reason of inadvertence or circumstances beyond the control of the company shall be disregarded if after knowledge or reason to know of the defect, the company effectuates a cure within a reasonable period pursuant to rules mutually agreed to by the competent authorities of the Contracting States. A company described in this paragraph which fails to satisfy the requirement of subparagraph 5(c)(ii) with respect to an issuer shall not be considered described in subparagraph 2(a) of Article 10 (Dividends) with respect to any stock of such issuer. Where a company which is a resident of Aruba (hereinafter referred to as "the parent corporation") directly owns 80 percent or more (by vote and value) of the stock of one or more other companies which are residents of Aruba (hereinafter referred to as "the first-tier subsidiary corporations"), and where any such first-tier subsidiary corporation directly owns 80 percent or more (by vote and value) of the stock of one or more other companies which are residents of Aruba (hereinafter referred to as "the second-tier subsidiary corporations") no member of the group of companies consisting of the parent corporation and the first- and scond-tier subsidiary corporations shall be treated as failing to meet any of the requirements of this paragraph it all of such requirements would be met in the event that such group of companies were treated as one company which is a resident of Aruba, provided that none of the shares of any first-or second-tier subsidiary corporation in such group are owned by any person other than the parent corporation, a first-tier subsidiary corporation, or a person acting as an investment adviser to such first- or second-tier subsidiary corporation.
6. The provisions of paragraphs 1 and 4 shall not apply to deny the benefits of paragraph 5 of Article 10 (Dividends) or the benefit of paragraph 5 of Article 24 (Non-discrimination) to a company resident in the other Contracting State if 90 percent or more of such company's gross receipts for the 3-year period ending with the close of its preceding taxable year consist of qualified real property receipts and, at the close of each quarter of such taxable year, the adjusted basis of such company's qualified real property assets equals or exceeds 80 percent of the sum of the adjusted basis of all of its assets. For purposes of this paragraph:
a) the term "qualified real property receipts" shall mean the receipts attributable or incidental to the purchase, sale, development, construction, improvement, lease, rental, holding, or other use or disposition of qualified real property assets, including interest on deferred payments in connection with the disposition of qualified real property assets, and interest on the temporary investment of reasonable working capital or purchase money for, or disposition proceeds of, qualified real property assets; and
b) the term "qualified real property assets" shall mean any of the following or property incidental thereto:
i) real property referred to in Article 6 (Income from Real Property) and in the case of real property situated in the United States shall include a United States real property interest (other than an interest in a company);
ii) any interest (other than an interest solely as a creditor) in any company (whether or not a resident of a Contracting State) which satisfies the conditions of this paragraph; and
iii) reasonable working capital, liquid assets temporarily held for purchase, or from disposition, of qualified real property assets, and evidence of indebtedness from disposition of qualified real property assets.
For purposes of this paragraph, receipts of, and assets held by, a partnership, estate, or trust shall be treated as being received and held proportionately by its partners or beneficiaries, and this rule shall apply successively up a chain where any partner or beneficiary is a partnership, estate, or trust. A company any of the stock in which is not traded on a designated stock exchange, as defined in clause i) of subparagraph a) of paragraph 5, shall not be eligible for the benefits of this paragraph unless all of the stock of such company is registered in the name of the ultimate beneficial owner or the identity of the ultimate beneficial owner is available to the competent authority of the Contracting State of which the company is resident.
7. The provisions of paragraphs 1 and 4 shall not apply to a pension fund or charitable organization of a Contracting State, provided that such person does not engage in transactions with a principal purpose of directly or indirectly extending benefits under the Convention to persons not resident in the Contracting State of which it is a resident.
8. If one of the Contracting States proposes to deny benefits to a resident of the other Contracting State by reason of this Article, the competent authorities of the Contracting States shall, upon request of the competent authority of the other Contracting State, consult each other.
