Dividend taxation limits permit source-state withholding while capping tax where recipient is the beneficial owner.

Taxation of cross-border dividends permits recipient-State taxation while preserving source-State taxing rights with a withholding cap where the recipient is the beneficial owner. Dividends include income from shares and similar participatory rights; the withholding limit does not apply when the beneficial owner's holding is effectively connected to a permanent establishment or fixed base in the source State, in which case business- or service-based rules govern. A resident company's undistributed profits derived from the other State are not subject to tax by that other State except where distributions go to its residents or are effectively connected with a permanent establishment or fixed base.

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