Royalties taxation: source state may tax but treaty limits withholding when beneficial owner is resident. Article 12 provides that royalties paid to a resident of the other Contracting State may be taxed in that resident's State, while the source State may also tax royalties but must limit withholding to a negotiated maximum when the beneficial owner is resident of the other State; competent authorities shall agree on application. The provision defines royalties broadly, deems source by payer residence or by permanent establishment/fixed base bearing the liability, excludes the withholding limitation where rights are effectively connected with a permanent establishment or fixed base, and requires arm's-length treatment where related parties inflate payments.
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.
Royalties taxation: source state may tax but treaty limits withholding when beneficial owner is resident.
Article 12 provides that royalties paid to a resident of the other Contracting State may be taxed in that resident's State, while the source State may also tax royalties but must limit withholding to a negotiated maximum when the beneficial owner is resident of the other State; competent authorities shall agree on application. The provision defines royalties broadly, deems source by payer residence or by permanent establishment/fixed base bearing the liability, excludes the withholding limitation where rights are effectively connected with a permanent establishment or fixed base, and requires arm's-length treatment where related parties inflate payments.
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