(1) Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in the other Contracting State if such resident is the beneficial owner of the royalties.
(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 recipient is the beneficial owner of the royalties, the tax so charged shall not exceed:
- (a) three percent of the gross amount of the royalties with respect to paragraph (3)(a) of this Article; and
- (b) five percent of the gross amount of the royalties with respect to paragraph (3)(b) of this Article.
(3) The term "royalties" as used in this Article means payments of any kind received:
- (a) for the use of, or the right to use, any copyright in scientific work, patents, trademarks, samples or models, plans, secret formulas or processes or for any information concerning industrial, commercial or scientific experience;
- (b) for the use of, or for the right to use any copyright in literary or artistic work, including cinematograph films and sound recordings for radio or television broadcasting; and for the use of or the right to use any type of equipment and transport vehicles.
(4) The provisions of paragraphs (1) and (2) 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 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 7 or Article 14 of this Convention, as the case may be, shall apply.
(5) Royalties shall be deemed to arise in a Contracting State if the payer is that State itself, one of its local authorities or a resident of that 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 fixed base in connection with which the obligation to pay the royalties arose, and such royalties are connected with such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
(6) Where, by reason of a special relationship, either 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 for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner of the royalties in the absence of such special 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 Convention.