ing regard to the debt-claim for which it is paid, exceeds the amount which would have

been agreed upon by the payer and the beneficial owner in the absence of such relation-

ship, 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.

ARTICLE 12

ROYALTIES

1. Royalties arising in a Contracting State and paid to a resident of the other Con-

tracting State may be taxed in that other State.

2. However, 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 of the roy-

alties is a resident of the other Contracting State, the tax so charged shall not exceed 5

per cent of the gross amount of the royalties. The competent authorities of the Contract-

ing States shall by mutual agreement settle the mode of application of this limitation.

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.

4. The provisions of paragraphs 1 and 2 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 situ-

ated therein, or performs in that other State 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 a Contracting State when the payer is a

resident of that State. 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 establish-

ment or fixed base in connection with which the liability to pay the royalties was in-

curred, 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 estab-

lishment 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, hav-

ing 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 ab-

sence 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

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