Dividends Taxed in Both States; 5% Cap for Beneficial Owners from Other State; Exceptions for Permanent Establishments

Dividends paid by a company resident in one Contracting State to a resident of the other may be taxed in the recipient's State. However, the State where the company resides may also tax these dividends, but the tax cannot exceed 5% if the beneficial owner is a resident of the other State. The term 'dividends' includes income from shares and similar rights. Exceptions apply if the dividend recipient has a permanent establishment in the company's State. A State cannot tax dividends from a company resident in another State unless the dividends are paid to its residents or connected to a permanent establishment there.