handbook-tb

Graeme S. Cooper2. 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…B) the company’s primary place of management andcontrol is in the Contracting State of which it isa resident;The definition of “primary place of management and control” inparagraph 5 reads:d) a company’s “primary place of management and control”will be in the Contracting State of which it is aresident only if executive officers and senior managementemployees exercise day-to-day responsibility for more ofthe strategic, financial and operational policy decisionmaking for the company (including its direct and indirectsubsidiaries) in that Contracting State than in anyother state and the staff of such persons conduct moreof the day-to-day activities necessary for preparing andmaking those decisions in that Contracting State than inany other state.That is to say, the test focuses on the place where operating decisionsare made, not, for example, where the company’s directors meet norwhere shareholder meetings occur. The test involves many components:‣ ¾ First, it is applied by looking at only certain corporate executives:“executive officers and senior management employees”and “the staff of such persons.” It seems that the test will befailed if either group does not satisfy the test;‣ ¾ Second, within that group, the test examines only thoseinvolved in “strategic, financial and operational policy decisionmaking.” They must have and exercise day-to-day decisionmakingresponsibilities;‣ ¾ Third, the test recognizes that management decisions can bespread throughout a corporate group, so the requirement is that298