Article 12 Royalties, fees for technical services and payments for the use of equipment

Royalties, fees for technical services and payments for the use of equipment arising in one of the States and paid to a resident of the other State may be taxed in that other State.

However, such royalties, fees and payments may also be taxed in the State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of these categories of income the tax so charged shall not exceed 20 per cent of the gross amount of the royalties, of the fees and payments.

The competent authorities of the States shall by mutual agreement settle the mode of application of paragraph 2.

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 motion picture films and works on film or videotape for use in connection with television, any patent, trade mark, design or model, plan, secret formula or process or for information concerning industrial, commercial or scientific experience.

The term ‘fees for technical services’ as used in this Article means payments of any kind to any person, other than payments to an employee of the person making the payments and to any individual for independent personal services mentioned in Article 14, in consideration for services of a managerial, technical or consultancy nature.

The term ‘payments for the use of equipment’ as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, industrial, commercial or scientific equipment.

The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, fees for technical services or the payments for the use of equipment, being a resident of one of the States, carries on business in the other State in which the royalties, fees for the technical services or the payments for the use of equipment 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, fees for technical services or the payments for the use of equipment are 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.

Royalties, fees for technical services or payments for the use of equipment shall be deemed to arise in one of the States 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, fees for technical services or the payments for the use of equipment, whether he is a resident of one of the States or not, has in one of the States a permanent establishment or a fixed base in connection with which the contract under which the royalties, fees for technical services or the payments for the use of equipment are paid was concluded, and such royalties, fees for technical services or payments for the use of equipment are borne by such permanent establishment of fixed base, then such royalties, fees for technical services or payments for the use of equipment shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

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, fees for technical services or the payments for the use of equipment, having regard to the royalties, technical services or the use of equipment 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 aplly only to the last-mentioned amount. In such case, the excess part of the payment shall remain taxable according to the laws of each State, due regard being had to the other provisions of this Convention.