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(1) Dividends paid by a ccmpany which is a resident of a Contracting State to a resident of the other Con- tracting State may be taxed in that other State.
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(2) However, such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law of that State, but the tax so charged shall not exceed: a) 10 per cent of the gross amount of the dividends if the recipient is a company which itself, or jointly within a partnership with other companies, holds at least 25 per cent of the capital of the company paying the dividends; b) in all other cases, 15 per cent of the gross amount of the dividends.
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(3) Notwithstanding the provisions of paragraph (2), the tax of a Contracting State on dividends paid by a company which is a resident of that State may exceed the rates provided for in that paragraph, but shall not exceed 25.75 per cent of the gross amount of the dividends, if a) the rate of the corporation tax of that State on distributed profits is lower than that on undistributed profits and the difference between those two rates is 20 percentage points or more, and b) such dividends are paid by a company which is a resident of that State to a company which is a resident of the other Contracting State and which itself or together with other persons controlling it or being under common control with it, holds, directly or in- directly, at least 25 per cent of the capital of the first-mentioned company.
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(4) The term “dividends” as used in this Article means income from shares, mining shares, tounders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation law of the State of which the company making the distribu- tion is a resident, and income derived by a sleeping partner trom his participation as such and distributions on certificates of an investment-trust.
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(5} The provisions of paragraphs (1) to (3) shall not apply if the recipient of the dividends, being a resident of a Contracting State, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue ot which the dividends are paid is effectively connected. In such a case, the provisions of Article 7 shall apply.
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(6) Where a company which is a resident of a Con- tracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company to persons who are not residents of that other State, or subject the company's undistributed profits to a tax on un- distributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.