Dividend withholding tax cap limits source-state taxation when beneficial owner is resident, subject to permanent establishment exceptions.

Taxation of dividends is divided between residence and source States: residence may tax dividend recipients, while the source State may also tax dividends but, when the beneficial owner is resident of the other Contracting State, a withholding tax cap limits that source taxation. The term "dividends" covers income from shares or similar profit participating rights. Exceptions apply where the beneficial owner's holding is effectively connected with a permanent establishment or fixed base in the source State, in which case business-income rules govern, and the source State is generally restricted from taxing dividends or undistributed profits except in specified connected circumstances.

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