Dividend withholding tax cap limits source-state taxation on cross-border dividends for nonresident beneficial owners while preserving company taxation.

Dividends paid by a resident company to a resident of the other Contracting State may be taxed in the recipient's State, while the source State may also tax such dividends but must limit tax where the beneficial owner is resident of the other State. The Article defines dividends to include income from shares and similar rights. Dividend provisions do not apply if the beneficial owner's holding is effectively connected with a permanent establishment or fixed base in the source State, in which case business profits or independent services rules govern. Source States may not tax dividends or undistributed profits except in specified connected situations.

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