Royalties taxation: source state may tax but reduced withholding applies where beneficial owner is resident, with PE exceptions.

Royalties paid between Contracting Parties may be taxed in the residence of the recipient but may also be taxed in the source state; where the beneficial owner is resident of the other Contracting Party the source tax on the gross amount is limited. The Article defines royalties broadly and excludes these rules when the beneficial owner's rights are effectively connected with a permanent establishment or fixed base in the source state, in which case business profits or independent personal services provisions apply. Non arm's length excess payments are treated separately, and treaty benefits are denied if one main purpose was to secure those benefits.

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