Italy - Royalty

Article 12. Royalties

1. Royalties arising in one of the States and paid to a resident of the other State may be taxed in that
other State.

2. However, such royalties may also be taxed in the State in which they arise and according to the
laws of that State, but if the recipient of the royalties is the beneficial owner thereof, the tax so
charged shall not exceed 5% of the gross amount of the royalties. The competent authorities of the
States shall by mutual agreement settle the mode of application of this paragraph.

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 and recordings for radio and television broadcasting, any 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.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties,
being a resident of one of the States, carries on business in the other 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 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 royalties may be taxed in that other State in accordance with its domestic
laws.

5. Royalties shall be deemed to arise in one of the States when the payer is that State itself, a
political or administrative subdivision, a local authority or a resident of that State. Where, however,
the person paying the royalties, 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 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.

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, 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 a case, the excess part of the payments shall
remain taxable according to the laws of each State, due regard being had to the other provisions of
this Convention.

Protocol:

5. With reference to Articles 10, 11 and 12

International organizations, their bodies and officials present in the territory of one of the States
shall not be entitled in the other State to any reduction of or exemption from tax referred to in
Articles 10, 11 and 12 concerning dividends, interest and royalties arising in that other State, if
such items of income are not subjected to a tax on income in the first-mentioned State.

6. With reference to Articles 10, 11, 12 and 22

As regards paragraph 6 of Article 10, paragraph 6 of Article 11, paragraph 4 of Article 12, and
paragraph 2 of Article 22, the last sentence included therein cannot be interpreted so that the
principles contained in Articles 7 and 14 of this Convention are not taken into consideration.

7. With reference to Articles 11 and 12

In determining the withholding tax rates as provided for in paragraph 2 of Article 11 and
paragraph 2 of Article 12, it has been taken into account that the Netherlands does not levy a
special withholding tax on interest and royalties paid to non-residents.