Hi, I'm still unclear on this. Can you please clarify where exactly the exemption falls down.
If I own 100% of the shares of UK company which in turn owns 100% of the share capital of the US C Corporation. The US C Corporation earns profits on rental income from residential property.
If the C Corp pays dividends to the UK Co then working through Article 10 I understand as follows:
Para 1: Dividends may be taxed in the receiveing state (UK)
Para 2: Dividends may also be taxed in the paying state (US) but reduced to 5% if the beneficial owner is a resident of the other state (UK) and owns >10% of the voting power of the paying company.
Para 3 (a) (iii):Dividends shall not be taxed in the paying state (US) if the beneficial owner of the dividend (UK Co) is at least 95% owned by 7 or fewer equivalent beneficiaries, and less than 50% of the gross income of the C Corp is distributed to persons who are not equivalent beneficiaries.
Para 4: Deals with pooled investment vehicles therefore paragraph irrelevant
Paras 5 - 8: Deal with permanent establishments therefore paragraphs irrelevant
Para 9: Deals with conduit arrangements therefore paragraph irrelevant