1. Royalties arising in a Contracting State and paid to a resi-
dent of the other Contracting State may be taxed in that other
State.
2. However, such royalties may also be taxed in the Contract-
ing 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:
(a) 2 per cent of the gross amount of such royalties which are
paid for the use of, or the right to use, industrial, commercial,
or scientific equipment; and
(b) 10 per cent of the gross amount of such royalties in all other
cases.
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, cin-
ematograph films, and films or tapes for radio or television
broadcasting, any patent, trade mark, design or model, plan,
secret formula or process, or for the use of, or the right to use,
industrial, commercial, or scientific equipment, or for information
concerning industrial, commercial or scientific experience.
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, or performs in that other State independent per-
sonal 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 a Contracting State
when the payer is that State itself, 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 Con-
tracting State or not, has in a Contracting State a permanent
establishment or a fixed base in connection with which the liabil-
ity to pay the royalties was incurred, and such royalties are borne
by such permanent establishment or fixed base, then such royal-
ties shall be deemed to arise in the Contracting State 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 pro-
visions 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 this Agreement.