Taxation of royalties: withholding limitations and permanent establishment exceptions determine source and residence taxing rights.

Article 12 generally assigns taxing rights on royalties to the beneficial owner's residence but allows source taxation when royalties are effectively connected with a permanent establishment or fixed base in the source State; the UN Model permits source taxation subject to a negotiated withholding limitation; both models define royalties broadly and deem royalties to arise where the payer is resident or where a payer's permanent establishment bears the liability; excess related party payments may be adjusted to arm's length amounts.

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