Dividend withholding limitation limits source-state tax to a limited rate for beneficial owners, subject to permanent establishment exceptions. Dividends may be taxed by the recipient's State but the source State where the paying company is resident may also tax them; however, if the recipient is the beneficial owner, source-state tax on dividends is limited to a restricted rate on gross dividends. 'Dividends' covers income from shares and other distributions treated as share income. The limitation does not apply where the beneficial owner carries on business or independent personal services in the source State through a permanent establishment or fixed base and the holding is effectively connected; in that case Article 7 or 14 applies. The source State may not tax dividends or undistributed profits derived from the other State except in the specified circumstances.