Royalties taxation: source state may tax royalties with limited withholding; PE connection shifts taxation to business profits rules. Article 13 permits taxation of royalties both in the recipient's State and in the source State, subject to a statutory cap on source taxation. If the royalty recipient has a permanent establishment or fixed base in the source State and the royalties are effectively connected with it, provisions for business profits or independent personal services apply instead. The Article provides a comprehensive definition of royalties and treats payments borne by a permanent establishment or paid by a government, local authority or resident as arising in that State. A special-relationship rule limits treaty coverage to arm's-length royalty amounts, leaving any excess taxable under domestic law.
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 royalties with limited withholding; PE connection shifts taxation to business profits rules.
Article 13 permits taxation of royalties both in the recipient's State and in the source State, subject to a statutory cap on source taxation. If the royalty recipient has a permanent establishment or fixed base in the source State and the royalties are effectively connected with it, provisions for business profits or independent personal services apply instead. The Article provides a comprehensive definition of royalties and treats payments borne by a permanent establishment or paid by a government, local authority or resident as arising in that State. A special-relationship rule limits treaty coverage to arm's-length royalty amounts, leaving any excess taxable under domestic law.
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