ARTICLE II
Article 10 (Dividends) of the Convention shall be deleted and replaced by the
following:
“Article 10
Dividends
1. Dividends paid by a company that is a resident of a Contracting State to
a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of
which the company paying the dividends is a resident and according to the
laws of that State, but if the beneficial owner of the dividends is a resident
of the other Contracting State, the tax so charged shall not exceed:
a) 5 percent of the gross amount of the dividends if the beneficial owner is
a company that owns:
(i) directly at least 10 percent of the voting stock of the company
paying the dividends, if such company is a resident of the United
States; or
(ii) directly or indirectly at least 10 percent of the capital of the
company paying the dividends, if such company is a resident of
France;
b) 15 percent of the gross amount of the dividends in all other cases.
3. Notwithstanding the provisions of paragraph 2, such dividends shall not
be taxed in the Contracting State of which the company paying the
dividends is a resident if the beneficial owner is a company that is a
resident of the other Contracting State that has owned, directly or
indirectly through one or more residents of either Contracting State,
shares representing 80 percent or more of the voting power of the
company paying the dividends in the case of the United States, or 80
percent or more of the capital of the company paying the dividends in the
case of France, for a 12-month period ending on the date on which
entitlement to the dividends is determined and:
a) satisfies the conditions of clause (i) or (ii) of subparagraph c) of
paragraph 2 of Article 30 (Limitation on Benefits of the Convention);
b) satisfies the conditions of clauses (i) and (ii) of subparagraph e) of
paragraph 2 of Article 30, provided that the company satisfies the
conditions described in paragraph 4 of that Article with respect to the
dividends;
c) is entitled to benefits with respect to the dividends under paragraph 3 of
Article 30; or
d) has received a determination pursuant to paragraph 6 of Article 30 with
respect to this paragraph.
4. Paragraphs 2 and 3 shall not affect the taxation of the company in
respect of the profits out of which the dividends are paid.
5. a) Subparagraph a) of paragraph 2 and paragraph 3 shall not apply in
the case of dividends paid by a U.S. Regulated Investment Company
(RIC), a U.S. Real Estate Investment Trust (REIT), a French “société
d'investissement à capital variable” (SICAV), a French “société
d’investissement immobilier cotée” (SIIC), or a French “société de
placement à prépondérance immobilière à capital variable” (SPPICAV).
b) In the case of dividends paid by a RIC or a SICAV, subparagraph (b) of
paragraph 2 shall apply. In the case of dividends paid by a REIT, a SIIC
or a SPPICAV, subparagraph (b) of paragraph 2 shall apply only if:
(i) the beneficial owner of the dividends is an individual, or a
pension trust or other organization maintained exclusively to
administer or provide retirement or employee benefits that is
established or sponsored by a resident, in either case holding an
interest of not more than 10 percent in the REIT, SIIC or
SPPICAV;
(ii) the dividends are paid with respect to a class of shares that is
publicly traded and the beneficial owner of the dividends is a
person holding an interest of not more than 5 percent of any class of
the REIT’s, SIIC’s or SPPICAV’s shares; or
(iii) the beneficial owner of the dividends is a person holding an
interest of not more than 10 percent in the REIT, SIIC or SPPICAV
and, in the case of a REIT, such REIT is diversified.
c) For purposes of this paragraph, a REIT shall be “diversified” if the
value of no single interest in real property exceeds 10 percent of its total
interests in real property. For the purposes of this provision, foreclosure
property shall not be considered an interest in real property. Where a
REIT holds an interest in a partnership, it shall be treated as owning
directly a proportion of the partnership’s interests in real property
corresponding to its interest in the partnership.
6. a) The term “dividends” means income from shares, “jouissance”
shares or “jouissance” rights, mining shares, founders’ shares or other
rights, not being debt-claims, participating in profits, as well as income
treated as a distribution by the taxation laws of the State of which the
company making the distribution is a resident; and income from
arrangements, including debt obligations, that carry the right to participate
in, or are determined with reference to, profits of the issuer or one of its
associated enterprises, as defined in subparagraph (a) or (b) of paragraph
1 of Article 9 (Associated Enterprises), to the extent that such income is
characterized as a dividend under the law of the Contracting State in
which the income arises. The term “dividend” shall not include income
referred to in Article 16 (Directors’ Fees).
b) The provisions of this Article shall apply where a beneficial owner of
dividends holds depository receipts evidencing ownership of the shares in
respect of which the dividends are paid, in lieu of the shares themselves.
7. The provisions of paragraphs 2 through 4 shall not apply if the
beneficial owner of the dividends, being a resident of a Contracting State,
carries on business in the other Contracting State, of which the company
paying the dividends is a resident, through a permanent establishment
situated therein, or performs in that other State independent personal
services from a fixed base situated therein, and the dividends are
attributable to such permanent establishment or fixed base. In such case,
the provisions of Article 7 (Business Profits) or Article 14 (Independent
Personal Services), as the case may be, shall apply.
8. a) A company that is a resident of a Contracting State and that has a
permanent establishment in the other Contracting State, or that is subject
to tax on a net basis in that other Contracting State on items of income
that may be taxed in that other State under Article 6 (Income From Real
Property) or under paragraph 1 of Article 13 (Capital Gains), may be
subject in that other Contracting State to a tax in addition to the tax
allowable under the other provisions of this Convention. Such tax,
however, may be imposed only on the portion of the business profits of
the company attributable to the permanent establishment and the portion
of the income referred to in the preceding sentence that is subject to tax
under Article 6 or paragraph 1 of Article 13 that,
(i) in the case of the United States, represents the “dividend
equivalent amount” of those profits and income; the term “dividend
equivalent amount” shall, for the purposes of this subparagraph,
have the meaning that it has under the law of the United States as it
may be amended from time to time without changing the general
principle thereof; and
(ii) in the case of France, is included in the base of the French
withholding tax in accordance with the provisions of Article 115
quinquies of the French tax code (Code général des impôts) or with
any similar provisions which amend or replace the provisions of
that Article.
b) The taxes referred to in subparagraph (a) also shall apply to the portion
of the business profits, or of the income subject to tax under Article 6
(Income From Real Property) or paragraph 1 of Article 13 (Capital Gains)
that is referred to in subparagraph (a), which is attributable to a trade or
business conducted in one Contracting State through a partnership or
other entity treated as a fiscally transparent entity under the laws of that
State by a company that is a member of such partnership or entity and a
resident of the other Contracting State.
9. The tax referred to in subparagraphs (a) and (b) of paragraph 8 shall not
be imposed at a rate exceeding the rate specified in subparagraph (a) of
paragraph 2. In any case, it shall not be imposed on a company that:
a) satisfies the conditions of clause (i) or (ii) of subparagraph (c) of
paragraph 2 of Article 30 (Limitation on Benefits of the Convention);
b) satisfies the conditions of clauses (i) and (ii) of subparagraph (e) of
paragraph 2 of Article 30, provided that the company satisfies the
conditions described in paragraph 4 of that Article with respect to an item
of income, profit, or gain described in paragraph 7;
c) is entitled under paragraph 3 of Article 30 to benefits with respect to an
item of income, profit, or gain described in paragraph 7; or
d) has received a determination pursuant to paragraph 6 of Article 30 with
respect to this paragraph.
10. Subject to the provisions of paragraph 8, where a company that is a
resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the
dividends paid by the company, except insofar as such dividends are paid
to a resident of that other State or insofar as the dividends are attributable
to a permanent establishment or fixed base situated in that other State, nor
subject the company’s undistributed profits to a tax on the company’s
undistributed profits, even if the dividends paid or the undistributed
profits consist wholly or partly of profits or income arising in such other
State.”