Royalties and fees for technical services: source-state taxation permitted, with reduced withholding when recipient is treaty resident.

Article 12 permits taxation of royalties and fees for technical services in both the recipient's State and the source State, with a capped tax in the source State where the beneficial owner is a resident of the other Contracting State. The Article defines royalties and fees for technical services, excludes cases where amounts are effectively connected with a permanent establishment or fixed base (in which case business profits or independent personal services provisions apply), deems when such payments arise in a Contracting State, and requires arm's-length adjustment for amounts inflated by special relationships.

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