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Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

ARTICLE 12

ROYALTIES

(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) Royalties described in sub-paragraph (a) of paragraph (3) and beneficially owned by a resident of a Contracting State may be taxed only in that State. Royalties described in sub-paragraph (b) of paragraph (3) 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 10 percent of the gross amount of the royalties.

(3) The term "royalties" as used in this Convention means payments of any kind received as a consideration for the use of, or the right to use:

  • (a) any copyright of literary, artistic or scientific work, including cinematographic films or films or tapes and other means of image or sound reproduction;
  • (b) any patent, trademark, design or model, plan, secret formula or process, or other like right or property, or for industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.

The term "royalties" also includes payments derived from the disposition of any such right or property which are contingent on the productivity, use or further disposition thereof.

(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 or has carried on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs or has performed in that other State independent personal services from a fixed base situated therein, and the royalties are attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.

(5) 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, 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 the Convention.

(6) For purposes of this Article:

  • (a) Royalties shall be treated as arising in a Contracting State when the payer is that State itself or a political subdivision or local authority of that State or a person who is a resident of that State for purposes of its tax. Where, however, the person paying the royalties, whether he is a resident of one of the Contracting States or not, has in a Contracting State a permanent establishment or fixed base in connection with which the liability to pay the royalties was incurred, and the royalties are borne by the permanent establishment or fixed base, then the royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  • (b) Where sub-paragraph (a) does not operate to treat royalties as arising in a Contracting State, royalties paid for the use of, or the right to use, in a Contracting State any property or right described in paragraph (3) shall be treated as arising in that State.