Royalties taxation under the treaty: source and residence rules, withholding caps, and permanent establishment limits. Royalties arising in one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State, and may also be taxed in the source State subject to reduced withholding limits where the recipient is the beneficial owner. Royalties include payments for the use of copyright, patents, trademarks, designs, models, plans, secret formulas or processes, equipment, and industrial, commercial or scientific experience. The article also sets out source rules, permanent establishment and fixed base exclusions, and an arm's length limitation where a special relationship inflates the royalty amount.