DT4630.12 - Canada: double taxation agreement, 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) However, such royalties may be taxed in the Contracting
State in which they arise, and according to the law of that State;
but if the recipient is the beneficial owner of the royalties the
tax so charged shall not exceed 10 per cent of the gross amount of
the royalties.
(3) Notwithstanding the provisions of paragraph 2 of this
Article,
- copyright royalties and other like payments in respect of the
production or reproduction of any literary, dramatic, musical or
artistic work (other than payments in respect of motion pictures
and works on film, videotape or other means of reproduction for use
in connection with television broadcasting);
- payments for the use of, or the right to use, any patent or for
information concerning industrial, commercial or scientific
experience (but not including any such payment provided in
connection with a rental or franchise agreement);
- payments for the use of, or the right to use, computer software;
arising in a Contracting State and beneficially owned by a
resident of the other Contracting State shall be taxable only in
that other State.
(4) 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, 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, and includes payments of any kind in respect of motion
pictures and works on film, videotape or other means of
reproduction for use in connection with television broadcasting.
(5) The provisions of paragraphs 1, 2 and 3 of this Article
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
professional 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 a case, the provisions of Article 7 or Article 14, as
the case may be, shall apply.
(6) Royalties 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, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent
establishment in connection with which the obligation to pay the
royalties was incurred, and those royalties are borne as such by
that permanent establishment, then such royalties shall be deemed
to arise in the Contracting State in which the permanent
establishment is situated.
(7) Where, owing to a special relationship between the payer
and the person deriving the royalties or between both of them and
some other person, the amount of the royalties paid exceeds for
whatever reason 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 that case, the excess
part of the payments shall remain taxable according to the law of
each Contracting State, due regard being had to the other
provisions of this Convention.
(8) The provisions of this Article shall not apply if it was
the main purpose or one of the main purposes of any person
concerned with the creation or assignment of the rights in respect
of which the royalties are paid to take advantage of this Article
by means of that creation or assignment.
