Dividend withholding taxation permits residence-state taxation while limiting source-state rates for beneficial owners and preserving permanent-establishment treatment.

Dividend income may be taxed in the recipient's State of residence and in the State where the paying company is resident. Where the recipient is the beneficial owner, source-State tax is capped at five per cent for a company directly holding at least ten per cent of the payer's capital, and at fifteen per cent otherwise. These limits do not apply where the holding is effectively connected with a permanent establishment or fixed base in the paying company's State; the relevant business-profit or independent-personal-services rules then apply.

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