Dividend withholding limits: beneficial owners face capped source taxation while residence and permanent establishment rules determine alternative taxation.

Dividends may be taxed in the recipient's residence but the source State may also tax dividends paid by its resident company; however, when the recipient is the beneficial owner the source tax on such dividends is limited by a prescribed cap. The withholding limits do not affect company taxation on the profits distributed. If the beneficial owner carries on business through a permanent establishment or fixed base in the source State and the holding is effectively connected, taxation is governed by the business profits or independent personal services provisions. A State where a company derives income from another State may not tax dividends paid by that company to nonresidents or impose a tax on undistributed profits, except where dividends are paid to residents or are effectively connected with a permanent establishment or fixed base.

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