Dividend taxation: source state may impose limited withholding on dividends to beneficial owners, with PE connections as exceptions.

Dividends may be taxed in the recipient's State of residence and also in the State where the distributing company is resident, but where the recipient is the beneficial owner a reduced withholding rate applies; "dividends" covers various profit participating shares and similar corporate rights. Treaty relief does not apply if the beneficial owner's holding is effectively connected with a permanent establishment or fixed base in the source State, in which case rules on business profits or independent personal services govern, and the source State may not otherwise tax such dividends or the company's undistributed profits.

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