Kazachstan - Royalty

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 also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient and the beneficial owner of the royalties is a resident of the other Contracting State the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

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

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:

a)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 (know-how) concerning industrial, commercial or scientific experience; and

b)industrial, commercial or scientific equipment.

5. Notwithstanding paragraph 2 of this Article, the beneficial owner of royalties in respect of leasing, as defined in subparagraph b) of paragraph 4 of this Article, may elect to be taxed in the Contracting State in which the royalties arise as if the right or property in respect of which such royalties are paid is effectively connected with a permanent establishment or fixed base in that State. In such case the provisions of Article 7 or Article 14 of this Convention, as the case may be, shall apply to the income and deductions (including depreciation) attributable to such right or property.

6. 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 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 case the provisions of Article 7 or Article 14, as the case may be, shall apply.

7. 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 or a fixed base in connection 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.

8. 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 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.

Protocol:

IX. Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

XI. Ad Articles 11 and 12

1. If Kazakhstan after 28 April 1995 has signed a Convention for the avoidance of double taxation with a present member State of the Organisation for Economic Co-operation and Development which provides for a lower effective rate on interest or on royalties (including a zero rate) then such lower rate shall automatically apply to residents of the Netherlands.

2. It is understood that the provisions of Articles 11 and 12 shall not apply if the debt-claim in respect of which the interest is paid, respectively if the right or property giving rise to the royalties, was created or assigned mainly for the purpose of taking advantage of these Articles. In case a Contracting State intends to apply this provision, its competent authority shall in advance consult with the competent authority of the other Contracting State.

XII. Ad Article 12

It is understood that where the beneficial owner of royalties in respect of leasing, as defined in subparagraph b) of paragraph 4 of Article 12, makes the election as meant in paragraph 5 of Article 12, any interest payable which is attributable to the right or property for which the royalty was received and which is deductable for determining the net basis as meant in paragraph 5 of Article 12 shall be deemed to have a source in the Contracting State in which the leasing payment arises. Any such interest payment, if made to a resident of the other Contracting State, will be subject to the provisions of Article 11 of this Convention. An election made under paragraph 5 of Article 12 shall be made to the competent authority of the Contracting State in which the leasing payment is deemed to have its source.