ARTICLE XIV
Article 30 (Limitation on Benefits of the Convention) of the Convention shall be
deleted and replaced by the following:
“Article 30
Limitation on Benefits of the Convention
1. A resident of a Contracting State shall be entitled to benefits otherwise
accorded to residents of a Contracting State by this Convention only to the
extent provided in this Article.
2. A resident of a Contracting State shall be entitled to all the benefits of
this Convention if the resident is:
a) an individual;
b) a Contracting State, a political subdivision (in the case of the United
States) or local authority thereof, or an agency or instrumentality of that
State, subdivision, or authority;
c) a company, if:
(i) its principal class of shares (and any disproportionate class of
shares) is regularly traded on one or more recognized stock
exchanges, and either
aa) its principal class of shares is primarily traded on a
recognized stock exchange located in the Contracting State
of which the company is a resident (or, in the case of a
company resident in France, on a recognized stock exchange
located within the European Union or, in the case of a
company resident in the United States, on a recognized stock
exchange located in another state that is a party to the North
American Free Trade Agreement); or
bb) the company’s primary place of management and control
is in the Contracting State of which it is a resident; or
(ii) at least 50 percent of the aggregate voting power and value of
the shares (and at least 50 percent of any disproportionate class of
shares) in the company are owned directly or indirectly by five or
fewer companies entitled to benefits under clause (i) of this
subparagraph or by persons described in subparagraph b), provided
that, in the case of indirect ownership, each intermediate owner is a
resident of either Contracting State;
d) a person described in clause (ii) of subparagraph (b) of paragraph 2 of
Article 4 (Resident) of this Convention, provided that
(i) in the case of a pension trust and any other organization
established in a State and maintained exclusively to administer or
provide retirement benefits that is established or sponsored by a
person that is a resident of that State under the provisions of Article
4, more than 50 percent of the person’s beneficiaries, members or
participants are individuals resident in either Contracting State; or
(ii) the organization sponsoring such person is entitled to the
benefits of this Convention pursuant to this Article, or
e) a person other than an individual, if:
(i) on at least half the days of the taxable year at least 50 percent of
the aggregate voting power and value of its shares (and at least 50
percent of any disproportionate class of shares) or other beneficial
interests in the person is owned, directly or indirectly, by residents
of the Contracting State of which that person is a resident that are
entitled to the benefits of this Convention under subparagraph (a),
subparagraph (b), clause (i) of subparagraph (c), or subparagraph
(d) of this paragraph, provided that, in the case of indirect
ownership, each intermediate owner is a resident of that
Contracting State; and
(ii) less than 50 percent of the person’s gross income for the taxable
year, as determined in the person's State of residence, is paid or
accrued, directly or indirectly, to persons who are not residents of
either Contracting State entitled to the benefits of this Convention
under subparagraph a), subparagraph b), clause (i) of subparagraph
c), or subparagraph d) of this paragraph in the form of payments
that are deductible for purposes of the taxes covered by this
Convention in the person’s State of residence (but not including
arm’s length payments in the ordinary course of business for
services or tangible property and payments in respect of financial
obligations to a bank that is not related to the payor).
f) An investment entity referred to in clause (iii) of subparagraph (b) of
paragraph 2 of Article 4 (Resident) provided that more than half of the
shares, rights, or interests in such entity are owned directly or indirectly
by:
(i) persons that are resident of the Contracting State of which the
investment entity is a resident and that qualify for benefits under
subparagraph a), subparagraph b), clause (i) of subparagraph c), or
subparagraph d) of this paragraph, and
(ii) citizens of the United States in the case of an investment entity
that is a resident of the United States,
provided that, in the case of indirect ownership, each intermediate owner
is a resident of the Contracting State of which the investment entity is a
resident.
3. A company that is a resident of a Contracting State shall also be
entitled to the benefits of the Convention if:
a) at least 95 percent of the aggregate voting power and value of its shares
(and at least 50 percent of any disproportionate class of shares) is owned,
directly or indirectly by seven or fewer persons that are equivalent
beneficiaries; and
b) less than 50 percent of the company’s gross income, as determined in
the company’s State of residence, for the taxable year is paid or accrued,
directly or indirectly, to persons who are not equivalent beneficiaries, in
the form of payments (but not including arm’s length payments in the
ordinary course of business for services or tangible property and payments
in respect of financial obligations to a bank that is not related to the
payor), that are deductible for the purposes of the taxes covered by this
Convention in the company’s State of residence.
4. a) A resident of a Contracting State shall be entitled to benefits of the
Convention with respect to an item of income derived from the other
Contracting State, regardless of whether the resident is entitled to benefits
under paragraph 2 or 3 of this Article, if the resident is engaged in the
active conduct of a trade or business in the first-mentioned State (other
than the business of making or managing investments for the resident’s
own account, unless these activities are banking, insurance or securities
activities carried on by a bank, insurance company or registered securities
dealer), and the income derived from the other Contracting State is
derived in connection with, or is incidental to, that trade or business.
b) If a resident of a Contracting State derives an item of income from a
trade or business activity in the other Contracting State, or derives an item
of income arising in the other Contracting State from an associated
enterprise, subparagraph a) of this paragraph shall apply to such item only
if the trade or business activity in the first-mentioned State is substantial
in relation to the trade or business activity in the other State. Whether a
trade or business activity is substantial for purposes of this paragraph shall
be determined based on all the facts and circumstances.
c) In determining whether a person is “engaged in the active conduct of a
trade or business” in a Contracting State under subparagraph a) of this
paragraph, activities conducted by persons connected to such person shall
be deemed to be conducted by such person. A person shall be connected
to another person if one possesses at least 50 percent of the beneficial
interest in the other (or, in the case of a company, at least 50 percent of
the aggregate vote and at least 50 percent of the aggregate value of the
shares in the company or of the beneficial equity interest in the company)
or another person possesses, directly or indirectly, at least 50 percent of
the beneficial interest (or, in the case of a company, at least 50 percent of
the aggregate vote and at least 50 percent of the aggregate value of the
shares in the company or of the beneficial equity interest in the company)
in each person. In any case, a person shall be considered to be connected
to another person 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.
5. Notwithstanding the preceding provisions of this Article, where an
enterprise of a Contracting State derives income from the other
Contracting State, and that income is attributable to a permanent
establishment which that enterprise has in a third jurisdiction, the tax
benefits that would otherwise apply under the other provisions of the
Convention shall not apply to that income if the combined tax that is
actually paid with respect to such income in the first-mentioned
Contracting State and in the third jurisdiction is less than 60 percent of the
tax that would have been payable in the first-mentioned State if the
income were earned in that Contracting State by the enterprise and were
not attributable to the permanent establishment in the third jurisdiction.
Any dividends, interest or royalties to which the provisions of this
paragraph apply shall be subject to tax in the other Contracting State at a
rate that shall not exceed 15 percent of the gross amount thereof. Any
other income to which the provisions of this paragraph apply shall be
subject to tax under the provisions of the domestic law of the other
Contracting State, notwithstanding any other provision of the Convention.
The provisions of this paragraph shall not apply if:
a) in the case of royalties, the royalties are received as compensation for
the use of, or the right to use, intangible property produced or developed
by the permanent establishment itself; or
b) in the case of any other income, the income derived from the other
Contracting State is derived in connection with, or is incidental to, the
active conduct of a trade or business carried on by the permanent
establishment in the third jurisdiction (other than the business of making,
managing or simply holding investments for the enterprise’s own account,
unless these activities are banking or securities activities carried on by a
bank or registered securities dealer).
6. A resident of a Contracting State that is not entitled to benefits pursuant
to the preceding paragraphs of this Article shall, nevertheless, be granted
benefits of the Convention if the competent authority of the other
Contracting State determines that the establishment, acquisition or
maintenance of such person and the conduct of its operations did not have
as one of its principal purposes the obtaining of benefits under the
Convention. The competent authority of the other Contracting State shall
consult with the competent authority of the first-mentioned State before
denying the benefits of the Convention under this paragraph.
7. For the purposes of this Article,
a) the term “principal class of shares” means the ordinary or common
shares of the company, provided that such class of shares represents the
majority of the voting power and value of the company. If no single class
of ordinary or common shares represents the majority of the aggregate
voting power and value of the company, the “principal class of shares” is
that class or those classes that in the aggregate represent a majority of the
aggregate voting power and value of the company.
b) the term “disproportionate class of shares” means any class of shares of
a company resident in one of the States that entitles the shareholder to
disproportionately higher participation, through dividends, redemption
payments or otherwise, in the earnings generated in the other State by
particular assets or activities of the company.
c) the term “shares” shall include depository receipts thereof.
d) the term “recognized stock exchange” means:
(i) the NASDAQ System owned by the National Association of
Securities Dealers, Inc. and any stock exchange registered with the
U.S. Securities and Exchange Commission as a national securities
exchange under the U.S. Securities Exchange Act of 1934;
(ii) the French stock exchanges controlled by the “Autorité des
marchés financiers”;
(iii) the stock exchanges of Amsterdam, Brussels, Frankfurt,
Hamburg, London, Lisbon, Madrid, Milan, Stockholm, Sydney,
Tokyo, Toronto and the Swiss stock exchange; and
(iv) any other stock exchanges agreed upon by the competent
authorities of the Contracting States.
e) a company’s primary place of management and control shall be in the
State of which it is a resident only if 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 (including its direct and indirect subsidiaries) in that State than
in any other state, and the staffs conduct more of the day-to-day activities
necessary for preparing and making those decisions in that State than in
any other state.
f) the term “equivalent beneficiary” means a resident of a member state of
the European Union or of a party to the North American Free Trade
Agreement, but only if that resident:
(i) aa) would be entitled to all the benefits of a comprehensive
convention for the avoidance of double taxation between any
member state of the European Union or any party to the
North American Free Trade Agreement and the Contracting
State from which the benefits of this Convention are claimed
under provisions analogous to subparagraph a), subparagraph
b), clause (i) of subparagraph c), or subparagraph d) of
paragraph 2 of this Article, provided that if such convention
does not contain a comprehensive limitation on benefits
article, the person would be entitled to the benefits of this
Convention by reason of subparagraph a), subparagraph b),
clause (i) of subparagraph c), or subparagraph d) of
paragraph 2 of this Article if such person were a resident of
one of the Contracting States under Article 4 (Resident) of
this Convention; and
bb) with respect to insurance premiums and to income
referred to in Articles 10 (Dividends), 11 (Interest) or 12
(Royalties) of this Convention, would be entitled under such
convention to an exemption from excise tax on such
premiums or a rate of tax with respect to the particular item
of income for which benefits are being claimed under this
Convention that is at least as low as the rate applicable under
this Convention; or
(ii) is a resident of a Contracting State that is entitled to the benefits
of this Convention by reason of subparagraph a), subparagraph b),
clause (i) of subparagraph c), or subparagraph d) of paragraph 2 of
this Article.
For the purposes of applying paragraph 3 of Article 10 (Dividends) in
order to determine whether a person owning shares, directly or indirectly,
in the company claiming the benefits of this Convention is an equivalent
beneficiary, such person shall be deemed to hold the same voting power
in the case of a company resident of the United States, or share of the
capital in the case of a company resident of France, in the company
paying the dividend as the company claiming the benefits holds in such
company.
g) with respect to dividends, interest, or royalties arising in France and
beneficially owned by a company that is a resident of the United States, a
company that is a resident of a member state of the European Union shall
be treated as satisfying the requirements of subparagraph (f)(i)(bb) for
purposes of determining whether such United States resident is entitled to
benefits under this paragraph if a payment of dividends, interest, or
royalties arising in France and paid directly to such resident of a member
state of the European Union would have been exempt from tax pursuant to
any directive of the European Union, notwithstanding that the income tax
convention between France and that other member state of the European
Union would provide for a higher rate of tax with respect to such payment
than the rate of tax applicable to such United States company under
Article 10 (Dividends), 11 (Interest), or 12 (Royalties) of this
Convention.”