Definition of related foreign inter- est holder Sample Clauses

Definition of related foreign inter- est holder. (i) Facts. The facts are the same as in Example 3, except that A has two 50-per- cent shareholders, FC1 and FC2. In year 2, A makes an interest payment of $25 to both FC1 and FC2. FC1 is a corporation organized under the laws of Country X, which has an income tax treaty in effect with the United States. FC2 is a corporation organized under the laws of Country Y, which also has an in- come tax treaty in effect with the United States. FP owns 100-percent of both FC1 and FC2, and is organized under the laws of Country X. Under Country X law, FC1 is not fiscally transparent with respect to the divi- dend, as defined in paragraph (d)(3)(ii) of this section. Under Country X law, FC1 is treated as deriving $50 of the $100 dividend payment received by A because A is fiscally trans- parent under the laws of Country X, as deter- mined under paragraph (d)(3)(iii) of this sec- tion. The applicable rate of tax on dividends under the U.S.-Country X income tax treaty is 5-percent with respect to a 10-percent or more corporate shareholder. Under Country Y law, FC2 is not treated as deriving any of the $100 dividend payment received by A be- cause, under the laws of Country Y, A is not a fiscally transparent entity.
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