handbook-tb

Preventing tax treaty abuseOECD clause into a series of discrete clauses, and explains the kindsof entities and situations to which it is catering. The qualifications andlimitations surrounding the rules are also examined.One set of tests focuses on the status of the foreign entity.Therefore, an individual who is a resident of one of the contractingStates will always be a “qualified person”:2. A resident of a Contracting State shall be a qualified personfor a taxable year if the resident is:a) an individual;In the same way, the government of the other contracting Stateand some government-owned agencies will also be a “qualified person”:2. A resident of a Contracting State shall be a qualified personfor a taxable year if the resident is…b) a Contracting State, or a political subdivision or localauthority thereof, or a statutory body, agency or instrumentalityof such State, political subdivision or localauthority;Third, various types of charities, benevolent and cultural institutionswill typically be a “qualified person” if they are established forone of the specified purposes:2. A resident of a Contracting State shall be a qualified personfor a taxable year if the resident is…d) a person, other than an individual, thati) was constituted and is operated exclusively for religious,charitable, scientific, artistic, cultural, or educationalpurposes;In this formulation, it is not necessary that the entity be exemptfrom tax in the residence country, although this will often be the casefor religious, charitable and similar organizations. Similarly, it is notsufficient that the entity is exempt from tax in the residence country— for example, various sporting organizations or hospitals mightbe tax exempt in the residence country but they would not qualifyunder subparagraph d).293