ARTICLE 12
Royalties and Fees for Included Services
1. Royalties and fees for included services arising in a
Contracting state and paid to a resident of the other Contracting
State may be taxed in that other state.
2. However, such royalties and fees for included services
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 or fees for included services is a
resident of the other Contracting state, the tax so charged shall
not exceed:
a) in the case of royalties referred to in sub-paragraph
(a) of paragraph 3 and fees for included services as defined
in this Article (other than services described in
sub-paragraph (b) of this paragraph):
i) during the first five taxable years for which
this Convention has effect,
A) 15 percent of the gross amount of the
royalties or fees for included services as defined in
this Article, where the payer of the royalties or
fees is the Government of that Contracting state, a
political subdivision or a public sector company; and
B) 20 percent of the gross amount of the
royalties or fees for included services in all other
cases; and
ii) during the subsequent years, 15 percent of the
gross amount of royalties or fees for included services;
and
b) in the case of royalties referred to in sub-paragraph
(b) of paragraph 3 and fees for included services as defined
in this Article that are ancillary and subsidiary to the
enjoyment of the property for which payment is received under
paragraph 3 (b) of this Article, 10 percent of the gross
amount of the royalties or fees for included services.
3. The term "royalties" as used in this Article means:
a) payments of any kind received as a consideration for the
use of, or the right to use, any copyright of a literary,
artistic, or scientific work, including cinematograph films or
work on film, tape or other means of reproduction for use in
connection with radio or television broadcasting, any patent,
trademark, design or model, plan, secret formula or process, or
for information concerning industrial, commercial or scientific
experience, including gains derived from the alienation of any
such right or property which are contingent on the productivity,
use, or disposition thereof; and
b) payments of any kind received as consideration for the use
of, or the right to use, any industrial, commercial, or
scientific equipment, other than payments derived by an
enterprise described in paragraph 1 of Article 8 (Shipping and
Air Transport) from activities described in paragraph 2(c) or 3
of Article 8.
4. For purposes of this Article, "fees for included
services" means payments of any kind to any person in
consideration for the rendering of any technical or consultancy
services (including through the provision of services of
technical or other personnel) if such services:
a) are ancillary and subsidiary to the application or
enjoyment of the right, property or information for which a
payment described in paragraph 3 is received; or
b) make available technical knowledge, experience, skill,
know-how, or processes, or consist of the development and
transfer of a technical plan or technical design.
5. Notwithstanding paragraph 4, "fees for included services"
does not include amounts paid:
a) for services that are ancillary and subsidiary, as well
as inextricably and essentially linked, to the sale of property
other than a sale described in paragraph 3(a);
b) for services that are ancillary and subsidiary to the
rental of ships, aircraft, containers or other equipment used in
connection with the operation of ships or aircraft in
international traffic;
c) for teaching in or by educational institutions;
d) for services for the personal use of the individual or
individuals making the payment; or
e) to an employee of the person making the payments or to
any individual or firm of individuals (other than a company) for
professional services as defined in Article 15 (Independent
Personal Services) .
6. The provisions of paragraphs 1 and 2 shall not apply if
the beneficial owner of the royalties or fees for included
services, being a resident of a Contracting state, carries on
business in the other Contracting state, in which the royalties
or fees for included services arise, through a permanent
establishment situated therein, or performs in that other state
independent personal services from a fixed base situated therein,
and the royalties or fees for included services are attributable
to such permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 15
(Independent Personal Services), as the case may be, shall apply.
7. (a) Royalties and fees for included services shall be
deemed to arise in a Contracting state when the payer is that
state itself, a political subdivision, a local authority, or a
resident of that state. Where, however, the person paying the
royalties or fees for included services, whether he is a resident
of a Contracting state or not, has in a Contracting state a
permanent establishment or a fixed base in connection with which
the liability to pay the royalties or fees for included services
was incurred, and such royalties or fees for included services
are borne by such permanent establishment or fixed base, then
such royalties or fees for included services shall be deemed to
arise in the Contracting state in which the permanent
establishment or fixed base is situated.
(b) Where under subparagraph (a) royalties or fees for
included services do not arise in one of the Contracting States,
and the royalties relate to the use of, or the right to use, the
right or property, or the fees for included services relate to
services performed, in one of the Contracting States, the
royalties or fees for included services shall be deemed to arise
in that Contracting state.
8. 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 or fees for included
services paid exceeds the amount which would have been paid 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.