Article 12 specifies the taxing jurisdiction over royalties of the States of residence and

source, and defines the terms necessary to apply the article.

Paragraph 1

Paragraph 1 provides that a royalty derived by a resident of a Contracting State that arises in the other Contracting State may be taxed in the first-mentioned Contracting States. For royalties from any other source paid to a resident, Article 22 (Other Income) grants the residence country exclusive taxing jurisdiction (other than for royalties attributable to a permanent establishment or fixed base in the other State).

Paragraphs 2 and 3

Paragraph 2 allows the State where the royalty arises, as defined in paragraph 5, to tax the royalty. If, however, the beneficial owner of the royalty is a resident of the other Contracting State, the tax may not exceed the maximum rates specified in subparagraphs 2(a) and 2(b) for the corresponding classes of royalties described in paragraph 3. The term "beneficial owner" is not defined in the Convention, and is, therefore, defined as under the internal law of the country imposing tax (i.e., the source country). The beneficial owner of the royalty for purposes of