Article 12 - Royalties

Royalties withholding tax: source state may tax royalties but the rate is capped when paid to a nonresident beneficial owner.

Royalties may be taxed in the recipient's State but also in the source State; where the beneficial owner is resident in the other Contracting State the source State's tax is limited to a capped withholding rate on the gross amount. The term covers payments for use of copyrights, patents, trademarks, designs, models, plans, secret formulas or processes, equipment, and information concerning industrial, commercial or scientific experience. Exceptions apply where royalties are effectively connected with a permanent establishment or fixed base in the source State, in which case business or independent services rules govern. Related party excess payments are limited to the arm's length amount for purposes of this Article.