Dividends taxation: source state may levy a limited withholding tax while residence state retains primary taxing rights.

Cross border taxation of dividends permits taxation in the recipient's State while the source State may impose a limited withholding tax where the recipient is the beneficial owner; company profits remain taxable in the resident State. The rules exclude dividends effectively connected with a permanent establishment or fixed base of the beneficial owner, in which case business profits or independent personal services provisions govern; the source State cannot tax dividends derived from the other State or the company's undistributed profits except when paid to its resident or effectively connected with a permanent establishment.

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