Direct Tax Avoidance Agreements

United Mexican States

Article 28

LIMITATION OF BENEFITS

1. Except as otherwise provided in this Article, a person (other than an individual), which is a resident of a Contracting State and which derives income from the other Contracting State shall be entitled to all the benefits of this Agreement otherwise accorded to residents of a Contracting State only if such a person has the qualifications as defined in paragraph 2 and meets the other conditions of this Agreement for the obtaining of any such benefits.

2. A person of a Contracting State is a qualified person for a fiscal year only if such person is either :

(a) Government entity; or

(b) a company incorporated in either of the Contracting States, if

(i) the principal class of its shares is listed on a recognized stock exchange as defined in paragraph 5 of this Article and is regularly traded on one or more recognized stock exchanges, or

(ii) at least 50 per cent of the aggregate vote or value of the shares in the company is owned directly or indirectly by one or more individuals residents of either of the Contracting States or/and by other persons incorporated in either of the Contracting States, at least 50 per cent of the aggregate vote or value of the shares or beneficial interest of which is owned directly or indirectly by one or more individuals residents of either of the Contracting States; or

(c) a partnership or association of persons, at least 50 per cent or more of whose beneficial interests is owned by one or more individuals residents of either of the Contracting States or/and by other persons incorporated in either of the Contracting States, at least 50 per cent of the aggregate vote or value of the shares or beneficial interest of which is owned directly or indirectly by one or more individuals residents of either of the Contracting States; or

(d) A charitable institution or other tax exempt entity whose main activities are carried on in either of the Contracting States :

Provided that the persons mentioned above will not be entitled to the benefits of the Agreement if more than 50 per cent of the person's gross income for the taxable year is paid or payable directly or indirectly to persons who are not residents of either of the Contracting States in the form of payments that are deductible for the purpose of computation of tax covered by this Agreement in the person's state of residence (but not including arm's length payment in the ordinary course of business for services or tangible property and payments in respect of financial obligations to a bank incurred in connection with a transaction entered into with the permanent establishment of the bank situated in either of the Contracting States).

3. A resident of a Contracting State shall nevertheless be granted the benefits of the Agreement if the Competent Authority of the other Contracting State determines that the said resident actively carries out business in the other State and that the establishment or acquisition or maintenance of such person and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the Agreement.

4. Before a resident of a Contracting State is denied relief from taxation in the other Contracting State by reason of paragraph 1, 2 or 3, the competent authorities of the Contracting States shall consult each other.

5. For the purposes of this Article the term 'recognised stock exchange' means

(a) in India, any stock exchange which is recognized by the Central Government under the Securities Contracts (Regulation) Act, 1956;

(b) in Mexico, the Mexican Stock Exchange Market (Bolsa Mexicana de Valores); and

6. Notwithstanding anything contained in paragraphs 2 to 5 above, any person shall not be entitled to the benefits of this Agreement, if its affairs were arranged in such a manner as if it was the main purpose or one of the main purposes to avoid taxes to which this Agreement applies.