Royalties taxation: source withholding limited while residence retains taxing rights, with PE connection altering the rule. The treaty permits residence taxation of royalties while allowing source taxation subject to a maximum withholding cap; royalties are broadly defined to include payments for use of intellectual property, equipment, and industrial information. If the recipient's permanent establishment in the source State is effectively connected with the royalties, business profits rules apply instead. Royalties are deemed to arise where the payer is resident or where they are borne by a permanent establishment, and where related-party pricing elevates payments above arm's-length the treaty applies only to the arm's-length portion, leaving excess amounts 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 withholding limited while residence retains taxing rights, with PE connection altering the rule.
The treaty permits residence taxation of royalties while allowing source taxation subject to a maximum withholding cap; royalties are broadly defined to include payments for use of intellectual property, equipment, and industrial information. If the recipient's permanent establishment in the source State is effectively connected with the royalties, business profits rules apply instead. Royalties are deemed to arise where the payer is resident or where they are borne by a permanent establishment, and where related-party pricing elevates payments above arm's-length the treaty applies only to the arm's-length portion, leaving excess amounts taxable under domestic law.
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