ARTICLE 12
Royalties
1. Royalties arising in a Contracting State and paid to a resident of the other contracting State
may be taxed in that other State.
2. Such 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 is a resident of the other Contracting State,
the tax so charged shall not exceed 5 percent of the gross amount of the royalties.
3. Notwithstanding the provisions of paragraph 2, royalties described in subparagraph (a) of
paragraph 4 that arise in a Contracting State and are beneficially owned by a resident of the other
Contracting State shall be taxable only in that other State.
4. The term "royalties" means:
(a) 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 or any neighboring right
(including reproduction rights and performing rights), any cinematographic film, any
sound or picture recording, or any software;
(b) payments of any kind received as a consideration for the use of; or the right to
use, any patent, trademark, design or model, plan, secret formula or process, or other like
right or property, or for information concerning industrial, commercial, or scientific
experience; and
(c) gains derived from the alienation of any such right or property described in this
paragraph that are contingent on the productivity, use, or further alienation thereof.
5. The provisions of paragraphs 1, 2, and 3 shall not apply if the beneficial owner of the
royalties, being a resident of a Contracting 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 personal services from a fixed base situated therein, and
the royalties are attributable to such permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the
case may be, shall apply.
6. (a) Royalties shall be deemed to arise in a Contracting State when the payer is a
resident of that State.
(b) Where, however, the person paying the royalties, 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 was incurred, and such
royalties are borne by such permanent establishment or fixed base, then such royalties
shall be deemed to arise in the State in which the permanent establishment or fixed base
is situated.
(c) Notwithstanding subparagraphs (a) and (b), royalties paid for the use of,; or the
right to use, property in a Contracting State shall be deemed to arise therein.
(d) Royalties shall be deemed to be paid to the beneficial owner at the latest when
they are taken into account as expenses for tax purposes in the Contracting State in which
they arise.
7. 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 State, due
regard being had to the other provisions of this Convention.