handbook-tb

Graeme S. Coopercollective investment vehicle is established or by equivalentbeneficiaries;A second part of the “qualified person” test focuses on theownership structure of the entity. This part of the test is intended forartificial legal entities such as companies, trusts and partnerships. Forthese kinds of entities, the tests focus on a number of different criteria— sometimes the residence of the owners of the entity, sometimesthe place where it is managed, sometimes the place where its shares aretraded, and so on.First, a rule is created for a publicly traded company — that is tosay, a company in which the principal class of shares is regularly tradedon a recognized stock exchange in either State (or in a third State, ifthe competent authorities agree). Such a company can be a “qualifiedperson” in one of two ways based on where its shares are traded orwhere its executives work. The rule applies only to “companies.” Otherentities which have interests that are listed on a stock exchange andregularly traded do not fall under this provision.The first option for becoming a “qualified person” is to demonstratethat the listed company’s main class of shares is principally tradedon the recognized stock exchanges of its State of residence — that is tosay, its shares are locally traded:2. A resident of a Contracting State shall be a qualified personfor a taxable year if the resident is…c) a company, if:i) the principal class of its shares (and any disproportionateclass of shares) is regularly traded on one ormore recognized stock exchanges, and…A) its principal class of shares is primarily traded onone or more recognized stock exchanges locatedin the Contracting State of which the company isa resident;This test looks to the location of the stock exchange rather thanto the location of the ultimate shareholders. It is quite possible, therefore,that a company will qualify under this test even though a substantialproportion of its ultimate shareholders will not be residents of296