Dividend withholding limit applies but excluded when holdings are effectively connected to a permanent establishment or fixed base. Dividends paid cross-border may be taxed in the recipient's State, while the payer's State may also tax dividends subject to a capped withholding tax when the recipient is the beneficial owner, without affecting the company's taxation on profits. The reduced withholding does not apply if the beneficial owner's holding is effectively connected with a permanent establishment or fixed base in the payer's State, in which case rules for business profits or independent personal services govern. A State where the company derives income generally may not tax those dividends or the company's undistributed profits except where paid to its residents or effectively connected with a permanent establishment or fixed base.