(1) Royalties including other like payments arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
(2) However, such royalties may be taxed in the Contracting State in which they arise, but the tax so charged shall not exceed:
- (a) 5 per cent of the gross amount of such payment if they are made as consideration for the use of, or the right to use any copyright of literary, artistic or scientific work;
- (b) 15 per cent of the gross amount of such payments if they are made as consideration for the use of, or the right to use any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, or for the right to use cinematograph films or tapes for television or broadcasting.
(3) The provisions of paragraph 2 shall likewise apply to the gains from the alienation of any right or property giving rise to such royalties if such right or property is alienated by a resident of a Contracting State for exclusive use in the other Contracting State and the payment of such right or property is borne by an enterprise of that other State or a permanent establishment situated therein.
(4) The provisions of paragraphs 2 and 3 shall not apply if the recipient of the royalties, being a resident of a Contracting State, has in the other Contracting State in which the royalties arise a permanent establishment and the royalties are attributable to that permanent establishment, provided that under the law of that other State the royalties are taxed as part of the profits of the permanent establishment.
(5) Royalties shall be deemed to arise in a Contracting State when the payer is that State, a "Land", a political subdivision, a local authority 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 with which the right or property giving rise to the royalties is effectively connected, and such royalties are borne by such permanent establishment, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment is situated.
(6) Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.