(1) Royalties arising in a Contracting State and paid or credit-
ed to a resident of the other Contracting State may be taxed in
that other State.
(2) However, those 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 of the royalties is a
resident of the other Contracting State, the tax so charged shall
not exceed 5 per cent of the gross amount of the royalties.
(3) The term “royalties” as used in this Article means pay-
ments or credits, whether periodical or not, and however
described or computed, to the extent to which they are made as
consideration for:
a) the use of, or the right to use, any copyright, patent, design
or model, plan, secret formula or process, trademark or other
like property or right;
b) the supply of scientific, technical, industrial or commercial
knowledge or information;
c) the supply of any assistance that is ancillary and subsidiary
to, and is furnished as a means of enabling the application or
enjoyment of, any such property or right as is mentioned in
subparagraph a) or any such knowledge or information as is
mentioned in subparagraph b);
d) the use of, or the right to use:
i)
motion picture films;
ii) films or audio or video tapes or disks, or any other means
of image or sound reproduction or transmission for use
in connection with television, radio or other broadcasting;
e) the use of, or the right to use, some or all of a radio frequency
spectrum or band as specified in a spectrum licence of a
Contracting State, where the payment or credit arises in that
State; or
f) total or partial forbearance in respect of the use or supply of
any property or right referred to in this paragraph.
(4) The provisions of paragraphs 1 and 2 shall not apply if the
beneficial owner of the royalties, being a resident of a Contract-
ing State, carries on business in the other Contracting State in
which the royalties arise through a permanent establishment
situated therein and the property or right in respect of which
the royalties are paid or credited is effectively connected with
such permanent establishment. In such case the provisions of
Article 7 shall apply.
(5) Royalties shall be deemed to arise in a Contracting State
when the payer is a resident of that State for the purposes of its
tax. Where, however, the person paying the royalties, whether
the person is a resident of a Contracting State or not, has in a
Contracting State or outside both Contracting States a perma-
nent establishment in connection with which the liability to pay
the royalties was incurred, and the royalties are borne by the
permanent establishment, then the royalties shall be deemed
to arise in the State in which the permanent establishment is
situated.
(6) Where, by reason of a special relationship between the
payer and the beneficial owner of the royalties, or between both
of them and some other person, the amount of the royalties paid
or credited, having regard to what they are paid or credited for,
exceeds the amount which might reasonably have been expect-
ed to 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 or credits shall remain
taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Agreement.