Royalties and technical service fees: source State may tax with limited withholding; PE and arm's length rules govern.

Article 12 permits the State of residence to tax royalties and technical service fees but allows the source State to tax them subject to a withholding limit when the recipient is the beneficial owner. It defines royalties and fees for technical services, excludes amounts covered by other Articles, and disapplies the source/withholding rule where the beneficial owner's receipts are effectively connected with a permanent establishment or fixed base in the source State. Source rules attribute income to the payer's residence or to the State of the permanent establishment or fixed base. Where related-party pricing inflates amounts, taxation is limited to the arm's-length portion.

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