United Kingdom - Royalty

Article 12. Royalties

1.  Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State.

2.  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.

3.  The provisions of paragraph 1 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 and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 of this Convention shall apply.

4.  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 paid exceeds, for whatever reason, 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.

5.  No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with an assignment of the royalties, or with the creation or assignment of the rights in respect of which the royalties are paid, or with the establishment, acquisition or maintenance of the company that is the beneficial owner of the royalties and the conduct of its operations, to take advantage of this Article. In any case where a Contracting State intends to apply this paragraph, its competent authority shall in advance consult with the competent authority of the other Contracting State.

Protocol:

VII. With reference to Articles 11 (Interest) and 12 (Royalties):

It is understood that no relief under these Articles shall be available where:

i.  interest or royalties, as the case may be, are paid to a company of the Netherlands;

ii.  that interest or those royalties are attributable to a permanent establishment of that company located in a third state with whom the Netherlands has a double taxation convention;

iii.  under that convention, the Netherlands eliminates double taxation by applying the exemption method with respect to such interest or royalties rather than allowing a deduction that would otherwise be granted under its domestic law; and

iv.  the tax levied in that third state is less than 60 per cent of the tax that would have been levied by the Netherlands had that interest or those royalties not been attributable to that permanent establishment.