Royalties taxation: reduced source-state withholding for beneficial owners resident abroad, subject to PE connection and arm's-length adjustment.

Article 12 permits residence-state taxation of royalties while allowing source-state taxation at a reduced withholding rate when the beneficial owner resides in the other Contracting State; it defines royalties broadly, deems source by payer residence or by payer's permanent establishment/fixed base bearing the liability, excludes the reduced rule where royalties are effectively connected with a permanent establishment or fixed base (applying business or independent services provisions instead), and confines treaty relief to arm's-length amounts where special relationships inflate payments.

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