Royalties withholding cap limits source-state taxation when the beneficial owner is resident, subject to permanent establishment connection. Article 12 governs taxation of royalties: source and residence States may tax royalties, but where the beneficial owner is resident of the other Contracting State the source State's tax is limited to 10 per cent of the gross amount. The Article defines royalties to include payments for copyrights, patents, trademarks, designs, equipment and technical information. If the beneficial owner has a permanent establishment or fixed base in the source State and the right is effectively connected, Articles 7 or 15 apply. Royalties are deemed to arise where the payer is resident or where a PE/fixed base bears the liability, and treaty relief is limited to arm's-length amounts in cases of special relationships.