(1) Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other State.
(2) However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the beneficial owner is a resident of the other contracting State, the tax so charged shall not exceed:
- (a) 10 per cent of the gross amount of the royalties for the use of, or the right to use industrial, commercial or scientific equipment;
- (b) 15 per cent of the gross amount of the royalties in all the other cases.
(3) The term “royalties” as used in this Article means amounts of any kind paid for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, tapes and other means of reproduction of sound and image, patents, trade mark, designs or models, plans, secret formulas or processes, or other intangible property, including the right of plant varieties breeders, or for the use of, or the right to use industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience.
(4) The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base, in such case, the provisions of Article 8 or Article 15, as the case may be, shall apply.
(5) Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base and the royalties are borne by such permanent establishment or fixed base then royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.
(6) Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right to use or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount, in such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
(7) The provisions of this Article shall not apply if the purpose or one of the main purposes of any person connected with the creation or allocation of rights on which royalties are paid, were to take out the advantages of this Article through such creation or allocation.