Dividend taxation limits on source-state withholding emphasize beneficial owner status and permanent establishment connection. The DTAA permits the residence state of the dividend recipient to tax dividends while allowing the source state to tax them subject to a reduced withholding ceiling where the recipient is the beneficial owner; dividends are defined to include income from shares and similar corporate rights. If the beneficial owner carries on business in the source state through a permanent establishment or fixed base and the holding is effectively connected, rules for business or independent personal services income apply instead. The source state is also restricted from taxing dividends that derive from the other contracting state and from imposing a tax on the company's undistributed profits, except where the recipient is a resident of that other state or the holding is effectively connected with a permanent establishment or fixed base there.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Dividend taxation limits on source-state withholding emphasize beneficial owner status and permanent establishment connection.
The DTAA permits the residence state of the dividend recipient to tax dividends while allowing the source state to tax them subject to a reduced withholding ceiling where the recipient is the beneficial owner; dividends are defined to include income from shares and similar corporate rights. If the beneficial owner carries on business in the source state through a permanent establishment or fixed base and the holding is effectively connected, rules for business or independent personal services income apply instead. The source state is also restricted from taxing dividends that derive from the other contracting state and from imposing a tax on the company's undistributed profits, except where the recipient is a resident of that other state or the holding is effectively connected with a permanent establishment or fixed base there.
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