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II SÉRIE-A — NÚMERO 58

d) An organization, trust, or other arrangement referred to in subparagraph 3, b), of the Protocol, provided that more than half of the members, participants, or beneficiaries, if any, in such organization, trust, or arrangements are residents of that Contracting State who are entitled, under this article, to the benefits of this Convention; or

e) A person with respect to which both of the following conditions are satisfied:

i) The ultimate beneficial owners of more than 50 percent of the beneficial interest in such person (or, in the case of a company, more than 50 percent of the vote and value of each class of the company's shares) are persons entitled to the benefits of this Convention under this paragraph 1 or citizens of the United States; and

if) Less than 50 percent of the gross income of such person is used, directly or indirectly, to meet liabilities (including liabilities for interest of royalties) other than to persons entitled to the benefits of this Convention under this paragraph 1 or citizens of the United States.

2 — A resident of a Contracting State that is not entitled to the benefits of this Convention under paragraph 1 shall, nevertheless, be entitled to the benefits of this Convention with respect to an item of income derived from the other State if:

a) The resident is engaged in the active conduct of a trade or business in the first-mentioned State (other than the business of making or managing investments, unless these activities are banking or insurance activities carried on by a bank or insurance company); and

b) the item of income is connected with or incidental to the trade or business in the first mentioned State; and

c) Such trade or business is substantial in relation to the activity in the other State that generated die income.

3 — A person that is not entitled to die benefits of the Convention pursuant to the provisions of paragraph 1 or 2 may, nevertheless, be granted the benefits of die Convention if the competent authority of the State in which the income in question arises so determines. For this purpose, one of the factors the competent authorities shall take into account is whether the establishment, acquisition, and 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 Convention.

4 — For purposes of subparagraph c) of paragraph 1, the term « recognized securities exchange» means:

a) The NASDAQ System owned by the National Association of Securities Dealers, Inc., and any stock exchange registered with the Securities and Exchange Commission as a national securities exchange for purposes of the Securities Exchange Act of 1934;

b) The Lisbon and Oporto Stock Exchanges; and

c) Any other stock exchange agreed upon by the competent authorities of the Contracting States.

5 — For purposes of subparagraph e), ii), of paragraph

1, the term «gross income» means gross receipts, or, where an enterprise is engaged in a business which includes the manufacture or production of goods, gross receipts reduced by the direct costs of labor and materials attributable to such manufacture or production and paid or payable out of such receipts.

6 — Notwithstanding the provisions of paragraphs 1 through 5, the benefits of this Convention shall not be allowed to any person that is entitled to income tax benefits under the provisions of the legislation and other measures relating to the tax-free zones (zonas francas) of Madeira and Santa Maria Island, or to benefits similar to those provided with respect to such tax-free zones that are made available under any legislation or other measure adopted by either Contracting State after the date of signature of this Convention. The competent authorities shall notify each other of any such legislation or measure and shall consult as to whether such benefits are similar.

Article 18 Directors' fees

Directors' fees and other similar payments derived by a resident of a Contracting State for services performed outside that Contracting State in his capacity as a member of the board of directors or supervisory board (in Portugal, conselho fiscal) or of another similar organ of a company that is a resident of the other Contracting State may be taxed in that other State.

Article 19

Artistes and sportsmen

1—Notwithstanding the provisions of articles 15, independent personal services*, and 16, «Dependent personal services*, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State except where the amount of the compensation derived by such entertainer or athlete, including expenses reimbursed to him or borne on his behalf, from such activities does not exceed 10,000 United States dollars or its equivalent in Portuguese escudos for the taxable year concerned.

2 — Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete but to another person, that income of that other person may, notwithstanding the provisions of articles 7, "Business profits*, and 15, win-dependent personal services*, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised, unless it is established mat neither the entertainer or athlete nor persons related thereto participate directly or indirectly in the profits of that other person in any manner, induing the receipt of deferred remuneration, bonuses, fees, dividends, partnership distributions, or other distributions.

3 — Notwithstanding the provisions of paragraphs 1 and

2, income derived by a resident of a Contracting State as an entertainer or athlete shall be exempt from tax by the other Contracting State if the visit to that other State is substantially supported by public funds of the first-mentioned State or a political or administrative subdivision or local authority thereof.