(1) Royalties arising in the sovereign territory of a Contracting
Party and paid to a resident of the sovereign territory of the
other Contracting Party may be taxed in the sovereign territory
of that other Contracting Party if such resident is the beneficial
owner of the interest.
(2) However, such royalties may also be taxed in the
sovereign territory of the Contracting Party in which it arises
according to the laws of the state of that Contracting Party, but
if the beneficial owner of the royalties is a resident of the
sovereign territory of the other Contracting Party, 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
payments of any kind received as a consideration for the use of,
or the right to use, any copyright of literary, artistic or scientific
work including cinematograph films, any patent, trade mark,
design or model, plan, secret formula or process, or for
information concerning industrial, commercial or scientific
experience. The term “royalties” shall also include payments of
any kind for the use or the right to use a person’s name, picture
or any other similar personality rights and on payments received
as consideration for the registration of entertainers’ or
sportsmen’s performances by radio or television.
(4) The provisions of paragraphs 1 and 2 shall not apply if the
beneficial owner of the royalties, being a resident of the
sovereign territory of a Contracting Party, carries on business in
the sovereign territory of the other Contracting Party in which
the royalties arise, through a permanent establishment situated
therein, or performs in the sovereign territory of that other
Contracting Party 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, as the case may be, shall
apply.
(5) Royalties shall be deemed to arise in the sovereign
territory of a Contracting Party if the debtor is the state of this
Contracting Party or, in the case of the German Contracting
Party, also one of its Länder or one of its political subdivisions,
or local authority thereof, or a resident of the sovereign territory
of this Contracting Party. Where, however, the person paying
the royalties, whether he is a resident of the sovereign territory
of a Contracting Party or not, has in the sovereign territory of a
Contracting State a permanent establishment or fixed base in
connection with which the liability to pay the royalties was
incurred, and such royalties are borne by such permanent
establishment or fixed base, then such royalties shall be
deemed to arise in the sovereign territory of the Contracting
Party in which the permanent establishment or fixed base is
situated.
(6) 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 Party, due regard being had to the other provisions
of this Agreement.