Page:United States Statutes at Large Volume 100 Part 3.djvu/770

 100 STAT. 2578

PUBLIC LAW 9 9 - 5 1 4 - O C T. 22, 1986

"(B) such foreign corporation is not a qualified resident of such foreign country but such income tax treaty permits a withholding tax on dividends described in section 861(a)(2)(B) which are paid by such foreign corporation. "(2) TREATY MODIFICATIONS.—If a foreign corporation is a qualified resident of a foreign country with which the United States has an income tax treaty— "(A) the rate of tax under subsection (a) shall be the rate of tax specified in such treaty— "(i) on branch profits if so specified, or "(ii) if not so specified, on dividends paid by a domestic corporation to a corporation resident in such country which wholly owns such domestic corporation, and "(B) any other limitations under such treaty on the tax imposed by subsection (a) shall apply. "(3) COORDINATION WITH 2ND TIER WITHHOLDING TAX.—

"(A) IN GENERAL.—If a foreign corporation is not exempt for any taxable year from the tax imposed by subsection (a) by reason of a treaty, no tax shall be imposed by section 871(a), 881(a), 1441, or 1442 on any dividends paid by such corporation during the taxable year. "(B) LIMITATION ON CERTAIN TREATY BENEFITS.—No foreign corporation which is not a qualified resident of a foreign country shall be entitled to claim benefits under any income tax treaty between the United States and such foreign country with respect to dividends— "(i) which are paid by such foreign corporation and with respect to which such foreign corporation is otherwise required to deduct and withhold tax under section 1441 or 1442, or "(ii) which are received by such foreign corporation and are described in section 861(a)(2)(B). "(4) QUALIFIED RESIDENT.—For purposes of this subsection— "(A) IN GENERAL.—Except as otherwise provided in this paragraph, the term 'qualified resident' means, with respect to any foreign country, any foreign corporation which is a resident of such foreign country unless— "(i) more than 50 percent (by value) of the stock of such foreign corporation is owned (within the meaning of section 883(c)(4)) by individuals who are not residents ac of such foreign country and who are not United States citizens or resident aliens, or e • "(ii) 50 percent or more of its income is used (directly or indirectly) to meet liabilities to persons who are not residents of such foreign country or the United States. "(B) SPECIAL RULE FOR PUBLICLY TRADED CORPORATIONS.—
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A foreign corporation which is a resident of a foreign country shall be treated as a qualified resident of such foreign country if— "(i) the stock of such corporation is primarily and regularly traded on an established securities market in such foreign country, or .1' "(ii) such corporation is wholly owned (either directly or indirectly) by another foreign corporation which is if tn. organized in such foreign country and the stock of which is so traded.

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